Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities
Act. Yes ¨ No x

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. Yes ¨ No x

Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes x No ¨

Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).Yes ¨ No ¨

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large
accelerated filer ¨

Accelerated filer ¨

Non-accelerated
filer ¨

Smaller reporting company x

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
x

As of
June 30, 2009, the last business day of the registrants’ most recently
completed second fiscal quarter, the aggregate market value of their common
equity held by non-affiliates was $58,852,988 based on the closing sales price
of the registrant’s common stock of $7.75 per share on June 30, 2009. For
purposes of this computation, all officers, directors and 10% beneficial owners
of the registrant are deemed to be affiliates. Such determination should not be
deemed to be an admission that such officers, directors or 10% beneficial owners
are, in fact, affiliates of the registrant.

The
number of shares outstanding of the registrant’s Common Stock, par value $0.0001
per share, as of March 31, 2010: 2,517,793

Certain
statements made in this Annual Report on Form 10-K constitute forward-looking
statements. Forward-looking statements include statements preceded by, followed
by or that include the words “may,” “could,” “would,” “should,” “believe,”
“expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “potential,”
“intend” or similar expressions. These statements include, among others,
statements regarding our expected business outlook, anticipated financial and
operating results, business strategy and means to implement the strategy, the
amount and timing of capital expenditures, the likelihood of our success in
building our business, financing plans, budgets, working capital needs and
sources of liquidity. We believe it is important to communicate our
expectations to our stockholders. However, there may be events in the future
that we are not able to predict accurately or over which we have no
control.

Forward-looking
statements, estimates and projections are based on management’s beliefs and
assumptions, are not guarantees of performance and may prove to be inaccurate.
Forward-looking statements also involve risks and uncertainties that could cause
actual results to differ materially from those contained in any forward-looking
statement and which may have a material adverse effect on our business,
financial condition, results of operations and liquidity. A number of important
factors could cause actual results or events to differ materially from those
indicated by forward-looking statements. These risks and uncertainties include,
but are not limited to, those factors listed in this Report under “Risk Factors.”

You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Report. Forward-looking statements involve
known and unknown risks and uncertainties that may cause our actual future
results to differ materially from those projected or contemplated in the
forward-looking statements.

All
forward-looking statements included herein attributable to us or any person
acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. Except to the extent
required by applicable laws and regulations, we undertake no obligation to
update these forward-looking statements to reflect events or circumstances after
the date of this report or to reflect the occurrence of unanticipated events.
You should be aware that the occurrence of the events described in the “Risk
Factors” section and elsewhere in this Report could have a material adverse
effect on us.

3

PART
I

ITEM 1.
BUSINESS

Ultimate
Escapes, Inc. (“we”, “us”, “our” or “the company”) operate a family of luxury
destination club offerings, including Elite ClubTM, Signature ClubTM
and Premiere Club
TM , with over 1,200 affluent club members. We provide club members and
their families with flexible access to a growing portfolio of multi-million
dollar club residences, exclusive member services and resort amenities. We
believe that we offer our club members access to more club destinations than any
other luxury destination club in the world, with over 140 luxury club residences
in 45 global destinations available in the mainland United States and Hawaii,
Mexico, Central America, the Caribbean and Europe as of December 31, 2009. Elite Club properties target
approximately $3 million in value, Signature Club properties
target approximately $2 million in value and Premiere Club properties
target approximately $1 million in value. As of December 31, 2009, we had
433 Elite Club members,
545 Signature Club
members and 236 Premiere
Club members. The majority of the properties are owned by us, and the
others are leased on either a long or short term basis. All of the properties
owned by us are subject to one or more mortgages. Of the 37 properties leased by
us as of December 31, 2009, 27 were subject to long-term leases and ten were
subject to short-term leases (including two short-term leases in which Private
Escapes Holdings, LLC (“PE Holdings”), an affiliate of ours, is the
lessor).

We
combine the privacy and intimacy of multi-million dollar residences in a wide
variety of global resort destinations with “white glove” member concierge
services and club amenities. Our management believes that we offer a unique and
compelling value proposition that is a cost effective vacation alternative for a
large, affluent target market that Spectrem Group estimates at year end 2008
included approximately 6.7 million “millionaires” in the United States with
assets of at least $1 million and approximately 840,000 “pentamillionaires” in
the United States with assets of at least $5 million. For the consumer market, a
club membership offers a more flexible, efficient and cost effective vacation
alternative as compared with the high costs, inefficiencies and hassles of
second home ownership in this cost range, the expense, uncertainties and
time-consuming effort to rent luxury villas in the United States and
international markets or the high costs and typical small rooms of luxury
hotels. For the corporate market, our corporate membership option targets the
growing multi-billion dollar corporate reward and incentive market, and offers
corporations an affordable, flexible corporate reward and incentive program for
top performing employees, senior executives, board members, key advisors,
existing customers and new prospects.

In
addition to providing club members with flexible access to a portfolio of over
140 luxury club residences in 45 global destinations as of December 31, 2009, we
provide our club members with preferred access to over 140 four and five-star
hotel properties and resorts affiliated with The Ultimate Collection
TM , offering club members access to hundreds of beach, mountain, golf,
metropolitan and leisure club properties in world-class resorts and destinations
throughout the world. With multiple club offerings and various club membership
levels in each club, we believe that we have the widest market appeal in the
destination club industry.

Club
members join us by paying a one-time, membership fee (similar to a golf club
membership) currently ranging from $70,000 to $450,000, depending on the club
level and membership usage plan. Club members also pay annual dues currently
ranging from $8,000 to $49,000 per year, again based on the corresponding club
level and membership usage plan. In addition to annual dues, additional revenues
are derived from upgrades, additional use fees and reciprocity fees from third
party operations. As currently structured, if a club member resigns from the
club, his or her club membership is redeemed on a three-in, one-out basis, which
means that three new club members must join the club before a current club
member who desires to resign from the club will have his or her club membership
redeemed. Such redeemed club member typically receives 80% of the club
membership resale proceeds with us retaining a 20% transfer fee. This redemption
mechanism is common in private country clubs and has also been adopted by most
destination clubs.

4

We also
offer an Ultimate
DiscoveryTM
“trial membership” whereby qualified club prospects or club member referrals can
purchase a seven-day “mini-vacation package” for an average of $3,500 and
experience the club as an authorized guest at one of our club properties within
six months of purchasing an Ultimate
Discovery trial membership. If the trial member purchases an
Ultimate Escapes lifetime membership within 30 days of completing the Ultimate Discovery vacation
experience, then 100% of the fee paid for the Ultimate Discovery trial
membership is applied toward the purchase of the lifetime
membership.

In 2008,
we launched the Ultimate
Reciprocity ProgramTM,
an affiliate club membership reciprocity program targeting a growing market
estimated by Ragatz Associates to consist of approximately 50,000 fractional and
private residence club owners at hundreds of private residence clubs and luxury
fractional ownership resorts in the United States, Mexico, Central America, the
Caribbean and Europe. The
Ultimate Reciprocity Program offers participating luxury resorts the
opportunity to offer their shared-use owners an affiliate club membership that
provides annual reciprocity access to our global club properties, affiliate
member services and club amenities; this program provides owners at
participating luxury resorts with reciprocal access to over 140 club properties
offered by us in the continental United States, Hawaii, Mexico, Central America,
the Caribbean and Europe. Participating resort developers sign multi-year
reciprocity agreements with us and pay an upfront affiliate resort developer fee
depending on resort size. In addition, participating resorts pay a one-time
affiliate member fee of $3,000 for each shared-use owner that participates at
each affiliated resort, which fee includes the affiliate club member’s first
year annual dues. Affiliate club members also pay us a $250 transaction fee for
each reciprocity transaction executed within our reservation system, and each
affiliate club member continues to pay its affiliate member annual dues
beginning in the second year of its affiliate club member reciprocity agreement
with us.

Participating
developers and shared-use owners contribute up to two weeks per year of
participating shared-use ownership inventory into our proprietary web-based
reservation system, providing over 1,200 club members with additional benefits,
including expanded access to new destinations and affiliated resorts generally
at no additional cost. The
Ultimate Reciprocity Program also provides participating luxury resort
developers with custom-designed websites developed and hosted by us that offer
affiliate resort developers and their club members online information about our
destinations, club properties, affiliate member services and on-line
availability, leveraging our advanced web-based technology
platform.

Participating
resorts have access to a variety of our reciprocity services designed to help
improve developer real estate sales performance, owner retention and owner
referrals. Additionally, we offer participating resorts an opportunity to
differentiate their shared ownership offerings from other non-affiliated
resorts, helping to increase participating resort developer’s sales and maintain
higher price points. To participating resort developers, bundling the Ultimate Reciprocity
Program with luxury shared ownership real estate creates a
unique “hybrid” offering that greatly expands the number of luxury resort
destinations and club properties that affiliate club members can book
reservations and travel to.

Resorts
that participate in the
Ultimate Reciprocity Program receive increased market exposure from a
base of over 1,200 affluent club members and their family and friends, some of
whom also explore purchasing additional vacation real estate while traveling to
club destinations. In addition, participating resorts benefit from reciprocal
reservations booked by our club members and their guests, who on average spend
between $5,000 and $10,000 per vacation on food, drinks, golf, spa,
entertainment and shopping when traveling to various club properties and
affiliated properties.

The
destination club industry has gone through dramatic changes and a period of
rapid consolidation over the last few years, which has led to fewer, larger
destination clubs that have achieved operating efficiencies as a result of
scalable, sustainable business models, experienced management teams, strong
capital bases, financial transparency and affordable access to high quality club
member services in the wide variety of global destinations.

5

We
believe that the two largest clubs in the industry, as measured by numbers of
members, are Exclusive Resorts and our company, with a combined 82% global
market share in the destination club industry, as noted in the chart below,
which shows the number of club members in various destination clubs and market
share, based on industry data available to us as of December 2009.

We were
structured to be more affordable than other luxury consumer vacation travel
options and business incentive travel options, including second home ownership,
while simultaneously offering equal or superior benefits (especially for anyone
requiring flexible access to private homes with multiple bedrooms for friends
and family). For individual club members, we eliminate the burdens of owning one
or multiple second homes and the uncertainties and expense of renting different
homes or villas in multiple United States and international markets. For
corporations, we offer a more affordable, flexible corporate reward and
incentive program for top performers, key advisors, key employees and important
customers and prospects.

We
operate a proprietary occupancy model that provides club members with flexible
access and reasonable availability, principally by maintaining a low 6-to-1
equivalent member-to-property ratio and purposely under-utilizing each club
property, targeting annual club occupancy of 75% or less. An
equivalent member is a member who has a 60 day annual plan. For all club
properties, occupancy was 57% during 2008 and 61% during 2009. We charge a
one-time membership fee to join the club that we believe is generally lower than
the typical down payment for a single second home property, and charge annual
dues that are generally a fraction of the cost of owning and operating a single
$1 – $3 plus million second home.

We have
focused on the creation of a unique brand supported by a valuable portfolio of
luxury properties in some of the world’s premier resort and urban destinations.
These luxury properties target the affluent family vacationer. We believe that
this affluent segment is particularly well-positioned for future
growth.

We
differentiate ourselves from our competitors with the widest offerings in the
destination club industry, with multiple clubs each offering five tiers of club
membership plans. The breadth of this offering provides our club members with
multiple upgrade paths, both in terms of use rights and club levels. Our club
membership provides club members with internal reciprocity use within all club
properties, which in some cases requires a nightly reciprocity fee for members
in Premiere Club
or Signature Club to
reserve residences in more expensive clubs (for example, Premiere Club members
reserving Elite Club
residences through internal reciprocity). The flexibility allows club members to
grow and change with the club, while providing incremental revenues streams to
us.

James M.
Tousignant, the founder of Ultimate Resort, LLC (“Ultimate Resort”) and our
President and Chief Executive Officer, and Richard Keith, the founder of Private
Escapes Destination Clubs (“Private Escapes”) and our Chairman, along with many
other members of our management team, have worked together for many years and
have over 100 years of collective experience building and managing public and
private companies.

6

History

We were
formed on May 14, 2007, as a blank check company for the purpose of acquiring,
or acquiring control of, through a merger, capital stock exchange, asset
acquisition, stock purchase or other similar business combination, one or more
domestic or international operating businesses. We changed our name from
“Fortress America Acquisition Corporation II” to “Secure America Acquisition
Corporation” on August 6, 2007 and on October 29, 2009 changed our name to
“Ultimate Escapes, Inc”.

On
October 29, 2009, we consummated a business combination with Ultimate Escapes
Holdings, LLC (“Ultimate Escapes Holdings”), pursuant to a Contribution
Agreement dated September 2, 2009, by and among us, Ultimate Escapes Holdings,
Ultimate Resort Holdings, LLC (“Ultimate Resort Holdings”) and James M.
Tousignant, in his capacity as the representative of the holders of the issued
and outstanding ownership units of Ultimate Escapes Holdings and Ultimate Resort
Holdings (the “Owner Representative”), as amended by Amendment No. 1 dated as of
October 28, 2009 (the “Contribution Agreement”). Although we legally acquired
Ultimate Escapes Holdings and it became our subsidiary, for accounting purposes,
the business combination with Ultimate Escapes Holdings was accounted for as a
reverse merger (the “reverse merger”), whereby Ultimate Escapes Holdings is the
continuing entity for financial reporting purposes and is deemed, for accounting
purposes, to have acquired us.

In
accordance with the Contribution Agreement, we received 1,232,601 ownership
units of Ultimate Escapes Holdings. The owners of Ultimate Escapes Holdings
prior to the reverse merger, consisting of Ultimate Resort Holdings, PE Holdings
and JDI Ultimate, L.L.C. (“JDI”) (collectively, the “UE Owners”) retained the
remaining 7,556,675 ownership units of Ultimate Escapes Holdings, which, under
the terms of the amended and restated operating agreement of Ultimate Escapes
Holdings (the “Operating Agreement”) may be converted on a one-to-one basis into
shares of our common stock. These 7,556,675 ownership units are held
as follows: 3,858,571 units by Ultimate Resort Holdings, 3,123,797 units by JDI
and 574,307 units by PE Holdings. Of such retained units, 717,884 units were
deposited into escrow at the closing of the reverse merger to secure the
indemnification obligations of the UE Owners to us. Additionally, the UE Owners
are eligible to receive up to an aggregate of 7,000,000 additional ownership
units of Ultimate Escapes Holdings, convertible on a one-to-one basis into
shares of our common stock upon the achievement of certain Adjusted EBITDA
milestones, as set forth in the Operating Agreement. For each ownership unit of
Ultimate Escapes Holdings issued to the UE Owners, the Owner Representative also
received one share of our Series A Voting Preferred Stock. At any time that any
UE Owner exchanges ownership units of Ultimate Escapes Holdings for shares of
our common stock, a like number of shares of Series A Voting Preferred Stock
will be canceled. Upon consummation of the reverse merger, Ultimate Escapes
Holdings became our subsidiary, and the business and assets of Ultimate Escapes
Holdings and its subsidiaries are our only operations.

Ultimate
Escapes Holdings was founded in 2004, as Ultimate Resort, by Mr. Tousignant to
address what he perceived was an emerging and underserved segment of the luxury
shared-use market — the high-end “luxury destination club.” Mr.
Tousignant has over 20 years of management experience, including with
entrepreneurial ventures and public companies.

Since its
inception in 2004, Ultimate Resort grew rapidly to become one of the largest
players in the destination club industry. Recognizing that achieving “critical
mass”, which it viewed as having at least 800 to 1,000 club members, is a key
component to operating a successful destination club business model, Ultimate
Resort aggressively pursued a two-tiered growth strategy of organic growth
combined with strategic transactions to reach critical mass
quickly.

In May
2007, Ultimate Resort Holdings acquired all of the assets and business of its
parent company, Ultimate Resort, and purchased certain real estate assets for
approximately $105 million in federal bankruptcy court as a result of the 2006
bankruptcy of Tanner & Haley. To finance the acquisition of the real estate
assets, secured debt financing was obtained from CapitalSource Finance, a
NYSE-listed specialty lender. In addition, new club membership agreements were
signed with 645 previous Tanner & Haley club members. In February 2008,
additional real estate assets were purchased for $12 million from Ventures
Equity Vacation Club and new club membership agreements were signed with 19
previous club members of Ventures Equity Vacation Club.

7

In May
2008, Ultimate Resort Holdings signed a cooperative marketing agreement and a
definitive contribution agreement to acquire certain assets and assume certain
liabilities from Private Escapes, including club properties of approximately $50
million, located in 28 beach, mountain, golf and metropolitan destinations
throughout the continental United States, Hawaii, Mexico, Central America, the
Caribbean and Europe. Private Escapes was founded by our Chairman, Richard
Keith, in 2003 and became a market leader at the one million dollar home entry
level category and, over several years of operations, became the industry’s
third largest destination club as measured by number of club members, according
to HalogenGuides. Also in May 2008, Ultimate Resort Holdings began operating its
business under the “Ultimate Escapes” brand name.

On
September 15, 2009, Ultimate Resort Holdings contributed all of its assets and
liabilities to Ultimate Escapes Holdings and, on the same date, Ultimate Escapes
Holdings completed the acquisition of a majority of the assets of Private
Escapes. On October 29, 2009, we completed the reverse merger business
combination with Ultimate Escapes Holdings.

Industry

Luxury
destination clubs first started to appear in the market in 1999 and since then
have become the second largest segment of the $1.5 billion luxury shared-use
vacation market in 2008, according to Ragatz Associates. The luxury shared-use
vacation market includes destination clubs, traditional fractional interests and
private residence clubs. Destination clubs differ from traditional fractional
interests and private residence clubs in a number of ways. The destination club
and fractional industry business models are fundamentally based on the purchase
of either a deeded real estate interest (timeshare/fractional) or some form of
member use right to access a collection of various club properties and
destinations (destination club). Within the fractional and destination club
umbrella, there are a variety of approaches, classified into the following three
categories:

•

Traditional Timeshare Interval
Week Ownership — The consumer purchases a deeded real
estate interest to a specific week at a specific resort. This specific
week purchased may then be exchanged through internal and/or external
exchange systems (such as RCI LLCor Interval, Leisure Group, Inc.),
either for a different interval week from another owner or, in some cases,
for an exchange credit. The traditional timeshare product structure has
been successful with low-to-medium income consumers, but has not been a
preferred choice by high-income, affluent consumers looking for a luxury
vacation experience, and, in our view, is not a competitive offering for
affluent consumers, as compared to new luxury vacation lifestyle products
like destination clubs being introduced to the market. Timeshare units are
generally smaller (1 – 2 bedroom, 1,200 square feet), with
modest furnishings and finishes and are generally thought to be
over-priced, hard to resell by owners and less flexible from the
consumer’s point of view.

•

Fractional Ownership/Private
Residence Clubs — Similar to the traditional timeshare
interval week system, the fractional or private residence club owner
typically purchases a higher quality fractional unit that generally
provides a larger deeded fractional interest, typically a one-sixth,
one-tenth or one-twelfth deeded ownership interest in a particular
fractional unit. Originally started in and around seasonal ski areas, this
product’s pricing and use structure is generally based on seasonal usage
patterns and owner use is typically planned nine to twelve months in
advance.

8

•

Destination Club
Membership — Destination clubs generally offer
non-equity, right-to-use club memberships that are structured more like
membership in a private country club. Destination clubs sell club
memberships that enable a club member to use the club’s homes, amenities
and club member services for a specified amount of time, typically two to
six weeks per year. They also provide their club members with access to
fully furnished, luxury one to six bedroom residences in any of the club’s
portfolio of residences. In addition, destination clubs typically provide
many of the amenities of a luxury five-star hotel, including personal
concierge services and access to private beaches, spas, golf courses, ski
resorts and yacht clubs. Destination clubs have grown to $349 million in
annual revenue in 2008, according to Ragatz Associates, appealing to
affluent club members who have exclusive use of a growing portfolio of
beautiful club homes, easy and flexible access, reasonable long-term value
and a superior level of member services and resort
amenities.

Growth
Strategy

Our
objective is to achieve significant EBITDA and revenue growth over the next
several years. Key elements of our future growth strategy include:

•

Expand Organic Sales
by:

•

Increasing
brand awareness and marketing spend to generate new club membership
sales

•

Increasing
club member referrals through member events held in major metropolitan
markets

•

Increasing
sales staff in major cities throughout North America and
internationally

•

Expanding
corporate membership sales programs

•

Encouraging
club member upgrades with regular incentive
programs

•

Pursue Additional
Acquisitions: Less expensive to buy existing clubs and
properties than build, due to historically lower club member acquisition
costs and real estate costs.

•

Global Expansion
in:

•

Europe

•

Asia

•

Marketing Partnerships/Joint
Ventures with Hospitality
REITS

•

“Private Label” Offerings with
Resort and Hospitality
Brands

Club
Membership Plans and Benefits

We offer
multiple club membership plans divided into three club tiers designated
Premiere, Signature and Elite, that provide club members between 14 and 60 days
of use annually at a unique collection of club and affiliate destinations
located around the world. Our destination properties are located in or near
markets with global tourist and business appeal that offer club members a world
class vacation experience. By combining the best elements of multi-million
dollar single family residences with world class amenities and concierge
service, management believes it has created the best and most cost-effective
option for access to luxury second-home ownership available in the market
today.

9

Premiere
Club TM

Premiere Club membership
plans range from the
Bronze plan, with an initial membership fee of $70,000 and $8,000 in
annual dues for 14 days of annual vacation use, up to the Platinum
Plus plan, with an initial membership fee of $150,000 and
$17,000 in annual dues for 60 days of annual vacation use. All of our club
membership plans include extended family use for maximum value and flexibility,
as club members may grant access to their unaccompanied family members (age 21
and over) for any amount of their given annual use. Each home in the Premiere Club portfolio is
designed to accommodate families with children of all ages. Premiere Club
properties have a target home value of approximately $1 million. The club allows
its members to upgrade their club membership plans as their vacation needs
evolve every year.

Signature
Club TM

Signature Club membership
plans range from the
Bronze plan, with an initial membership fee of $145,000 and $11,500 in
annual dues for 14 days of annual vacation use, up to the Platinum
Plus membership plan, with an initial membership fee of
$300,000 and $35,500 in annual dues for 60 days of annual vacation use. All of
our club membership plans included extended family use for maximum value and
flexibility, as club members may grant access to their unaccompanied family
members (age 21 and over) for any amount of their given annual use. Each home in
the Signature Club
portfolio is designed to accommodate families with children of all ages. Signature Club
properties are generally larger than homes in the Premiere Club and have a
target home value of approximately $2 million. The club allows its members to
upgrade their club membership plans as their vacation needs evolve every
year.

Elite
Club TM

Elite Club membership plans
range from the Bronze
plan, with an initial membership fee of $200,000 and annual dues of $16,000 for
14 days of annual vacation use, up to the Platinum Plus plan, with an
initial membership fee of $450,000 and $49,000 in annual dues for 60 days of
annual vacation use. All of our club membership plans included extended family
use for maximum value and flexibility, as club members may grant access to their
unaccompanied family members (age 21 and over) for any amount of their given
annual use. Each home in the
Elite Club portfolio is designed to accommodate families with children of
all ages. Elite
Club properties are generally larger than homes in the Premiere Club and Signature Club and are of
the highest standards, with target home values of approximately $3 million and
the club allows club members to upgrade their club membership plans as their
vacation needs evolve every year.

Members
of any club membership plan can add a “corporate option” to their
club membership for an additional 10% of their club membership and annual dues.
This allows the club member to designate any key executives, employees,
customers and business prospects (21 and over) to use the club unattended by the
primary club member. The corporate use option has proven to be a valuable tool
for employee rewards and retention programs.

The
Ultimate Collection TM

The Ultimate Collection provides
club members with access to over 140 luxury four and five-star hotels in many of
the world’s most desirable cities and resorts throughout the United States,
Europe, Asia, the Middle East, Central America and South America, Africa and
Australia. Club members can make reservations at any of the beautiful luxury
hotels in exciting cities and resorts, using up to seven of the club membership
“included days” each year, as if a club member was using club
properties.

Ultimate
Rewards Program TM

The
Ultimate Rewards Program is the destination club industry’s first club
membership rewards points program which rewards club members who recommend a
friend, family member or business colleague for club membership if they
subsequently join us. Club members can redeem reward points for extra club days,
annual dues, private yacht and jet charters, private chef services, trips to
special events and much more.

10

Smart
Home Technology

We have
invested in developing a proprietary web-based technology platform and we are
planning to begin using “smart home” technology to improve our ability to manage
club properties, reduce energy and water consumption and provide club members
with a safer and more comfortable experience and home environment.

Seasonality

Our
business, like most organizations in the travel industry, is subject to seasonal
activity. The chart below shows overall club occupancy by month for 2009 and
this seasonality pattern is typical for historical years as well. High travel
seasons are typically January through March for winter vacations and June
through August for summer vacations. A key factor is the school calendar, for
those club members with children still living at home, which creates greater
occupancy pressure during holiday periods. Seasonality also varies by type of
destination. For example, club mountain properties are typically heavily
occupied during the ski season, yet tend to remain vacant during the “shoulder
seasons” (April through early June and September through December) resulting in
an annualized occupancy of 40 – 45%. Conversely, club city
destinations are typically not seasonal due to both business and pleasure trips,
consistently generating month-over-month club occupancies in the
80 – 90% range.

2009
Seasonality

Regulation

Our
business is subject to and affected by international, federal, state and local
laws, regulations and policies, which are subject to change. The descriptions of
the laws, regulations and policies that follow are summaries of those which we
believe to be most relevant to our business and do not purport to cover all of
the laws, regulations and policies that affect our businesses. We believe that
we are in material compliance with these laws, regulations and
policies.

•

Marketing Operations.
Our club products are marketed through a number of distribution channels,
each of which is regulated at the federal and state level. Such
regulations may limit our ability to solicit new customers or to market
additional products or services to existing customers. For example, to
comply with state and federal “do not call” regulations, we have adopted
processes to routinely identify and remove phone numbers listed on the
various “do not call” registries from our calling lists and have
instituted procedures for preventing unsolicited or otherwise unauthorized
telemarketing calls. We have similarly adopted email messaging practices,
and utilize various software systems responsive to the requirements of
various state and federal regulations which may place limitations on our
ability to engage our consumers in electronic mail marketing campaigns,
most notably, the CAN-SPAM Act, which imposes various requirements on the
transmission of e-mail messages whose primary purpose is to advertise or
promote a commercial product or service. Further we have placed an
emphasis on permission-based marketing and
referrals.

11

•

Privacy and Data
Collection. The collection and use of personal data of
our customers, as well as the sharing of our customer data with affiliates
and third parties, are governed by privacy laws and regulations enacted in
the United States and in other jurisdictions around the world. For
instance, several states have introduced legislation or enacted laws and
regulations that require compliance with standards with standards for data
collection and protection of privacy and, in some instances, provide for
penalties for failure to notify customers when the security of a company’s
electronic/computer systems designed to protect such standards are
breached, even by third parties. Other states, such as California, have
enacted legislation that requires enhanced disclosure on Internet web
sites regarding consumer privacy and information sharing among affiliated
entities or have such legislation pending. In addition, the European Union
Directive on Data Protection requires that, unless the use of data is
“necessary” for certain specified purposes, including, for example, the
performance of a contract with the individual concerned, consent must be
obtained to use the data (other than in accordance with our stipulated
privacy policies) or to transfer it outside of the European Union. We
believe that we are in material compliance with the laws and regulations
applicable to privacy and data collection as such are relevant to our
business.

•

Internet. A
number of laws and regulations have been adopted to regulate the Internet,
particularly in the areas of privacy and data collection. In addition, it
is possible that existing laws may be interpreted to apply to the Internet
in ways that the existing laws are not currently applied, particularly
with respect to the imposition of state and local taxes on transactions
through the Internet. Regulatory and legal requirements are particularly
subject to change with respect to the Internet. We cannot predict with
certainty whether such new requirements will affect our practices or
impact our ability to market our products and services
online.

•

Seller of Travel
Regulation. Our activities in the State of Florida are
governed by the Florida Sellers of Travel Act, Chapter 559, Florida
Statutes. We currently hold all necessary registrations under this
statute, and believe that we are in material compliance with its
provisions.

•

Regulations of Timeshare Plan
and Similar Products. We are confident based upon
various regulatory opinions and court decisions that our business is not
currently subject to any various State regulations governing timeshare
plans and similar products, provided however that we have not received nor
requested either a declaratory ruling or no-action letter from any State
agency with respect to same. Because of the lack of any enacted regulation
as specifically respects the destination club industry, we cannot predict
with certainty the likelihood of the imposition of new laws and regulation
of the industry, or the likelihood that existing regulations of timeshare
plans will be extended, interpreted and applied to include the destination
club industry and/or the club products currently being marketed and sold
in our business.

Competition

We
operate principally in the luxury vacation industry and compete against numerous
global, regional and boutique destination clubs; as well as other shared usage
or interval ownership resort and vacation property companies, real estate
developers and sponsors; vacation home owners, brokers and managers; resort
sponsors and managers; and, more broadly, luxury resorts and other
transient/leisure accommodations; as well as alternative leisure and recreation
categories, such as golf clubs or other club membership organizations. We have
encountered and expect to encounter in the future intense competition from our
rivals in the destination club industry and from other companies offering
competitive products and services. Many of our competitors have greater consumer
recognition or resources and/or more established and familiar products than us.
The factors that we believe are important to customers include:

12

•

number
and variety of club destinations available to club
members;

•

quality
of member services and concierge
services;

•

quality
of destination club properties;

•

pricing
of club membership plans;

•

type
and quality of resort amenities
offered;

•

reputation
of club;

•

destination
club properties in proximity to major population
centers;

•

availability
and cost of air and ground transportation to destination club properties;
and

•

ease
of travel to resorts (including direct flights by major
airlines).

We have
many competitors for our club members, including other major resort destinations
worldwide. We also directly compete with other destination clubs, such as
Exclusive Resorts, which is the largest company in the destination club
marketplace, as measured by number of club members. Our destination club members
can choose from any of these alternatives.

Club
Members Located Abroad

As of
December 31, 2009, we had 54 club members that reside outside the United States
in the following countries:

Mexico

2

Canada

41

Estonia

1

Germany

1

United
Kingdom

8

Brazil

1

Total:

54

Intellectual
Property

We own
the trademarks “Ultimate Escapes,” “Ultimate Resort,” “Private Escapes” and
related trademarks. Such trademarks are material to our business. All of the
material trademarks are registered (or have applications pending) with the
United States Patent and Trademark Office as well as, in some cases, with the
relevant authorities in certain foreign countries.

We also
own the following Internet domain names: ultimateescapes.com,
whatisadestinationclub.com, whatsadestinationclub.com, private-escapes.com,
ultimateescapes.info, ultimateescapes.net, ultimateescapes.org,
ultimateescapes.tv, privateescapes.com and
privateescapes.co.uk.

13

Employees

As of
December 31, 2009, we had 88 full time employees. Our employees are not covered
under any collective bargaining agreement and we have never experienced a work
stoppage. We believe we have good relations with our employees.

ITEM
1A.

RISK
FACTORS

We
operate in a rapidly changing environment that involves a number of risks, some
of which are beyond our control. This discussion highlights some of the risks
which may affect future operating results. These are the risks and uncertainties
we believe are most important for you to consider. Additional risks and
uncertainties not presently known to us, which we currently deem immaterial or
which are similar to those faced by other companies in our industry or business
in general, may also impair our business operations. If any of the following
risks or uncertainties actually occurs, our business, financial condition and
operating results would likely suffer.

Risks
Related to Our Company

We
have a history of losses, and may never achieve or sustain
profitability.

We
incurred substantial losses, and we may continue to incur substantial losses in
the future. We incurred net losses of $13.0 million and $23.2 million during the
year ended December 31, 2009 and the year ended December 31, 2008, respectively.
We have also experienced a decrease in new club membership sales and existing
club member upgrades during the last six months of 2008 and all of 2009. These
circumstances raise substantial doubt about our ability to continue to fund
operating losses and provide necessary operating liquidity. Even if we do
achieve profitability, we may be unable to sustain or increase our profitability
in the future.

We
have received a report from our independent registered public accounting firm
expressing doubt regarding our ability to continue as a going
concern.

Our independent registered public
accounting firm noted in their report accompanying our consolidated balance
sheets of December 31, 2009 and 2008 and the related consolidated statements of
operations, changes in owners’ equity (deficit) and cash flows for the years
ended December 31, 2009 and 2008 that our recurring losses from operations and
ongoing requirements for additional capital investment raise substantial doubt
about our ability to continue as a going concern. Management plans to maintain
our viability as a going concern by:

if necessary, selling selected club
properties;

closely maintaining and reducing
operating expenses; and

seeking to raise additional working
capital.

We cannot
assure you that our plans will be successful. This doubt about our ability to
continue as a going concern could adversely affect our ability to obtain
additional financing at favorable terms, if at all, as such an opinion may cause
investors to have reservations about our long-term prospects, and may adversely
affect our relationship with customers and others. If we cannot successfully
continue as a going concern, our stockholders may lose their entire investment
in us.

14

Our
business is capital intensive and the lack of available financing to fund the
acquisition of additional destination club properties and our operations could
adversely affect our ability to maintain and grow our club membership base which
could adversely affect our business, financial condition and results of
operations.

In order
for our destination clubs to remain attractive and competitive, we have to spend
a significant amount of money to keep the properties well maintained, modernized
and refurbished and to add new luxury properties periodically to our portfolio
of destination club properties as we add new club members. This creates an
ongoing need for cash and, to the extent we cannot fund expenditures from cash
generated by operations, funds must be borrowed or otherwise obtained. We could
finance future expenditures from any of the following sources:

•

cash
flow from operations;

•

non-recourse,
sale-leaseback or other financing;

•

bank
borrowings;

•

annual
dues increases or club member
assessments;

•

public
and private offerings of debt or
equity;

•

sale
of existing real estate; or

•

some
combination of the above.

We might
not be able to obtain financing for future expenditures on favorable terms or at
all, which could inhibit our ability to continue to grow. Events during 2008 and
2009, including the failures and near failures of numerous financial services
companies and the decrease in liquidity and available equity and debt capital
have negatively impacted the capital markets for real estate investments.
Accordingly, our financial results have been and may continue to be impacted by
the cost and availability of funds needed to grow our business.

We
have a substantial amount of indebtedness, which could adversely affect our
financial position.

We have a
substantial amount of indebtedness. As of December 31, 2009, we had total debt
of approximately $123 million, consisting of $99 million of borrowings under our
senior secured credit facility and $24 million of additional debt obligations
secured by destination club properties. Our senior secured credit facility is an
amended and restated $110 million revolving credit facility with CapitalSource,
secured by our real estate assets, which will mature on April 30, 2011, subject
to extension by us for up to two one-year periods. The revolving credit facility
includes financial and operational covenants that limit our ability to incur
additional indebtedness and pay dividends as well as purchase or dispose of
significant assets. Covenants in the revolving credit facility include
obligations to maintain either a restricted cash balance of not less than six
months of debt service or a debt service coverage ratio of 1.25 to 1, to
maintain a leverage ratio between debt and consolidated net worth of no more
than 3.5 to 1, to comply with specified ratios of number of club properties to
club members, to have a net loss of no more than $10 million in fiscal
2009 and $5 million in fiscal 2010, and to have net income in each
year thereafter (as adjusted in each year for the non-refundable portion of new
member initiation fees not yet recognized in income and, in 2009, for non-cash
stock-based compensation), and to maintain a consolidated debt ratio of no more
than 80%. Although we believe that we are in compliance with all of the
covenants in the revolving credit facility, we have previously violated certain
covenants contained in our prior revolving credit facility with CapitalSource,
which covenant violations were waived by the lender, we cannot provide any
assurance that in the future, if we were to need a waiver of a breach of a
covenant, that such a waiver would be granted. In addition, we have
approximately $23 million in additional indebtedness secured by real estate
assets with various first and second mortgage lenders. In the event we default
on our secured debt obligations, the lenders could enforce their rights under
the loan agreements, which would impair our ability to conduct our business and
have a material adverse effect on our business, financial condition and results
of operations. If we are unable to make payments on one or more mortgages on the
properties or otherwise default on our debt obligations, the lenders could
foreclose on such properties, which would have a material adverse effect on our
business, financial condition and results of operations. We may also incur
significant additional indebtedness in the future. Our substantial indebtedness
may:

15

•

make
it difficult for us to satisfy our financial obligations, including making
scheduled principal and interest payments on our
indebtedness;

•

limit
our ability to borrow additional funds for working capital, capital
expenditures, acquisitions or other general business
purposes;

•

limit
our ability to use our cash flow or obtain additional financing for future
working capital, capital expenditures, acquisitions or other general
business purposes;

•

require
us to use a substantial portion of our cash flow from operations to make
debt service payments;

•

limit
our flexibility to plan for, or react to, changes in our business and
industry;

•

place
us at a competitive disadvantage compared to less leveraged competitors;
and

•

increase
our vulnerability to the impact of adverse economic and industry
conditions.

We
may not be able to generate sufficient cash to service our debt
obligations.

Our
ability to make payments on and to refinance our indebtedness will depend on our
financial and operating performance, which is subject to prevailing economic and
competitive conditions and to certain financial, business and other factors
beyond our control. We may be unable to maintain a level of cash flows from
operating activities sufficient to permit us to pay the principal, premium, if
any, and interest on our indebtedness.

If our
cash flows and capital resources are insufficient to fund our debt service
obligations, we may be forced to reduce or delay investments and capital
expenditures, or to sell assets, seek additional capital or restructure or
refinance our indebtedness. These alternative measures may not be successful and
may not permit us to meet our scheduled debt service obligations. In the absence
of such operating results and resources, we could face substantial liquidity
problems and might be required to dispose of material assets or operations to
meet our debt service and other obligations. Our senior secured credit agreement
restricts our ability to dispose of assets, and requires the use of proceeds
from any disposition of assets to repay our indebtedness. We may not be able to
consummate those dispositions or to obtain the proceeds that we could realize
from them and these proceeds may not be adequate to meet any debt service
obligations then due.

The
luxury vacation industry is highly competitive and we are subject to risks
relating to competition that may adversely affect our performance.

We
operate principally in the luxury vacation industry and compete against numerous
global, regional and boutique destination clubs; as well as other shared usage
or interval ownership resort and vacation property companies, real estate
developers and sponsors; vacation home owners, brokers and managers; resort
sponsors and managers; and, more broadly, luxury resorts and other
transient/leisure accommodations; as well as alternative leisure and recreation
categories, such as golf clubs or other club membership organizations. We have
encountered and expect to encounter in the future intense competition from our
rivals in the destination club industry and from other companies offering
competitive products and services. Many of our competitors have greater consumer
recognition or resources and/or more established and familiar products than us.
The factors that we believe are important to customers include:

•

number
and variety of club destinations available to club
members;

•

quality
of member services and concierge
services;

•

quality
of destination club properties;

•

pricing
of club membership plans;

16

•

type
and quality of resort amenities
offered;

•

reputation
of club;

•

destination
club properties in proximity to major population
centers;

•

availability
and cost of air and ground transportation to destination club properties;
and

•

ease
of travel to resorts (including direct flights by major
airlines).

We have
many competitors for our club members, including other major resort destinations
worldwide. We also directly compete with other destination clubs, such as
Exclusive Resorts, which is the largest company in the destination club
marketplace, as measured by number of club members. Our destination club members
can choose from any of these alternatives.

We
compete with numerous other resorts that may have greater financial resources
than we do and that may be able to adapt more quickly to changes in customer
requirements or devote greater resources to promotion of their offerings than we
can. We believe that developing and maintaining a competitive advantage will
require continued investment in our technology platform, brand, existing
destination club properties and the acquisition of additional luxury properties
to our portfolio of destination club properties. There can be no assurance that
we will have sufficient resources to make the necessary investments to do so, or
that we will be able to compete successfully in this market or against such
competitors.

We
are subject to the operating risks common to the luxury vacation industry which
could adversely affect our business, financial condition and results of
operations.

Our
business is subject to numerous operating risks common to the luxury vacation
industry. Some of these risks include:

decreases
in the demand for transient rooms and related lodging services, including
a reduction in personal and business travel as a result of general
economic conditions;

•

cyclical
over-building in the vacation ownership
industry;

•

restrictive
changes in zoning and similar land use laws and regulations or in health,
safety and environmental laws, rules and regulations and other
governmental and regulatory action;

•

changes
in travel patterns;

•

the
costs and administrative burdens associated with compliance with
applicable laws and regulations, including, among others, franchising,
timeshare, privacy, licensing, labor and employment, and regulations under
the Office of Foreign Assets Control and the Foreign Corrupt Practices
Act;

•

the
availability and cost of capital to allow us to fund acquisitions of
additional destination club properties, renovations and
investments;

•

disruptions
in relationships with third parties, including marketing alliances and
affiliations with luxury resort property
owners;

•

foreign
exchange fluctuations; and

•

the
financial condition of the airline industry and the impact on air
travel.

The
matters described above could result in a decrease in the number, or lack of
growth, in our destination club members and could have a material adverse effect
on the luxury vacation industry, which in turn could have a material adverse
effect on our business, financial condition and results of
operations.

17

The
current slowdown in the travel industry and the global economy generally will
continue to impact our financial results and growth.

The
present economic slowdown and the uncertainty over its breadth, depth and
duration has had a negative impact on the luxury vacation industry. There is now
general consensus among economists that the economies of the United States,
Europe and much of the rest of the world have been in a recession since December
2007. The current downturn in the economy has reduced, and may in the future
reduce the demand for our destination club memberships and may increase club
member resignations and redemptions. Accordingly, our financial results have
been impacted by the economic slowdown and both our future financial results and
growth could be further harmed if the recession continues for a significant
period or becomes worse.

We
are subject to the risks that generally relate to real estate investments, which
may have a material adverse effect on our business, financial condition and
results of operations.

We are
subject to the risks that generally relate to investments in real property
because we own most of our destination club properties. The investment returns
available from equity investments in real estate depend in large part on the
amount of income earned and capital appreciation generated by the related
properties, and the expenses incurred. In addition, a variety of other factors
affect income from properties and real estate values, including governmental
regulations, insurance, zoning, tax and eminent domain laws, interest rate
levels and the availability of financing. When interest rates increase, the cost
of acquiring, developing, expanding or renovating real property increases and
real property values may decrease as the number of potential buyers decreases.
Similarly, as financing becomes less available, it becomes more difficult both
to acquire and to sell real property. In addition, our loan facility restricts
our ability to sell our assets, including our real estate holdings. Finally,
under eminent domain laws, governments can take real property. Sometimes this
taking is for less compensation than the owner believes the property is worth.
Any of these factors could have a material adverse impact on our results of
operations or financial condition. In addition, equity real estate investments
are difficult to sell quickly and we may not be able to adjust our portfolio of
owned properties quickly in response to economic or other conditions. If our
properties do not generate revenue sufficient to meet operating expenses,
including debt service and capital expenditures, our income and financial
condition will be adversely affected. The real estate investment industry is
susceptible to trends in the national and/or regional economies and there can be
no assurance that we can operate our destination club properties and then later
sell any or all of them at a profit.

Our
properties require routine maintenance as well as periodic renovations and
capital improvements. Ongoing renovations at a particular property may
negatively impact the desirability of the property as a vacation destination. A
significant decrease in the supply of available vacation rental accommodations
and the need for vacation rental services during renovation periods, coupled
with the inability to attract vacationers to properties undergoing renovations,
could have a material adverse effect on our business, financial condition and
results of operations.

18

Environmental
liabilities, including claims with respect to mold or hazardous or toxic
substances, could have a negative impact on our reputation and cause us to incur
additional expense to remedy any such liability or claim.

Under
various federal, state, local and foreign environmental laws, ordinances and
regulations, a current or previous property owner of real property may be liable
for the costs of removal or remediation of hazardous or toxic substances,
including mold, on, under or in such property. These laws could impose liability
without regard to whether we knew of, or were responsible for, the presence of
hazardous or toxic substances. The presence of hazardous or toxic substances, or
the failure to properly clean up such substances when present, could jeopardize
our ability to develop, use, sell or rent the real property or to borrow using
the real property as collateral. If we arrange for the disposal or treatment of
hazardous or toxic wastes, we could be liable for the costs of removing or
cleaning up wastes at the disposal or treatment facility, even if we never owned
or operated that facility. Other laws, ordinances and regulations could require
us to manage, abate or remove lead or asbestos containing materials. Similarly,
the operation and closure of storage tanks are often regulated by federal,
state, local and foreign laws. Certain laws, ordinances and regulations,
particularly those governing the management or preservation of wetlands, coastal
zones and threatened or endangered species, could limit our ability to develop,
use, sell or rent our real property.

We cannot
provide any assurances that environmental issues will not exist with respect to
any destination club property we own or acquire. Even if environmental
inspections are made, environmental issues may later be determined to exist
because the inspections were not complete or accurate or environmental releases
migrate to the properties from adjacent property. In addition to liability for
environmental issues which can substantially adversely impact our business and
financial condition, the marketability of the destination club properties for
sale or refinancing can be adversely affected because of the concerns of a third
party who may buy or lend money on the properties over the possible
environmental liability and/or environmental clean-up costs. In addition, our
reputation may be damaged by any alleged claim or incurrence of environmental
liabilities, which could reduce demand for our destination club memberships and
have a material adverse effect on our business.

We
own properties that are located internationally and thus are subject to special
political and monetary risks not generally applicable to our domestic
properties.

We
operate properties located abroad which, as of December 31, 2009, included 44
properties in 12 international locations. We intend to expand our portfolio of
international destination club properties. Properties abroad generally are
subject to various political, geopolitical, and other risks that are not present
or are different in the United States. These risks include the risk of war,
terrorism, civil unrest, expropriation and nationalization and regulation, as
well as the impact in cases in which there are inconsistencies between U.S. law
and the laws of an international jurisdiction. In addition, sales in
international jurisdictions typically are made in local currencies, which
subject us to risks associated with currency fluctuations. Currency devaluations
and unfavorable changes in international monetary and tax policies could have a
material adverse effect on our profitability and financing plans, as could other
changes in the international regulatory climate and international economic
conditions, in the event that we increase our operation of properties
abroad.

We
have a limited operating history, which may make it difficult to predict our
future performance.

We have
been operating only since 2004 and therefore do not have an established
operating history. In addition, the acquisition of certain assets and
liabilities of Private Escapes was consummated on September 15, 2009, and as a
result we now have a much larger base of club members, club properties and
employees to manage and operate. Consequently, any predictions you make about
our future success or viability may not be as accurate as they could be if we
had a longer operating history.

We
may experience financial and operational risks in connection with acquisitions.
In addition, businesses acquired by us may incur significant losses from
operations or experience impairment of carrying value.

We
completed our acquisition of certain assets and liabilities of Private Escapes
on September 15, 2009, and intend to selectively pursue other acquisitions.
However, we may be unable to identify attractive acquisition candidates or
complete transactions on favorable terms. In addition, in the case of acquired
assets or businesses, we may need to:

19

•

successfully
integrate the operations, as well as the accounting, financial and
disclosure controls, management information, technology, human resources
and other administrative systems, of acquired businesses with existing
operations and systems;

•

maintain
third party relationships previously established by acquired
companies;

•

retain
senior management and other key personnel at acquired businesses;
and

We may
not be successful in addressing these challenges or any others encountered in
connection with historical and future acquisitions. In addition, the anticipated
benefits of one or more acquisitions may not be realized and future acquisitions
could result in potentially dilutive issuances of equity securities and/or the
assumption of contingent liabilities. Also, the value of goodwill and other
intangible assets acquired could be impacted by one or more unfavorable events
or trends, which could result in impairment charges. The occurrence of any of
these events could adversely affect our business, financial condition and
results of operations.

We
may not be able to achieve our growth objectives.

We may
not be able to achieve our objectives for maintaining our existing club members,
increasing our number of new club members through organic growth, acquisitions
and acquiring additional luxury properties to add to our portfolio of
destination club properties. Our ability to complete acquisitions of additional
properties depends on a variety of factors, including our ability to obtain
financing on acceptable terms and requisite lender and government approvals.
Even if we are able to complete acquisitions of additional luxury properties, we
may not be able to grow our club membership base or effectively integrate such
acquisitions.

Extensive
laws and government regulations could affect the way we conduct our business
plan.

Our
business exists in a regulatory environment that is changing and evolving and
where certain regulatory matters are currently uncertain. Such matters include,
but are not limited to, the question of whether our destination club memberships
constitute timeshare/vacation ownership plans or timeshare use plans, as well as
whether such club memberships being offered may constitute the offering of
unregistered securities under the US federal and/or state securities laws. We
believe that our club membership sales do not constitute timeshare/vacation
ownership plans or timeshare use plans, nor do they constitute offers of
securities under any federal or state laws or regulations. If, however, the club
membership sales were determined to constitute timeshare/vacation ownership
plans or timeshare use plans, or be deemed to be securities under any state or
federal law, we would be required to comply with applicable state timeshare
regulations or state and federal securities laws, including those laws
pertaining to registration or qualification of securities, licensing of
salespeople and other matters. If we cannot comply with the applicable timeshare
regulations or state and federal securities requirements, in that event, and/or
the determination may create liabilities or contingencies, including rescission
rights relating to the club memberships we previously sold, as well as fines and
penalties that could adversely affect our business, financial condition and
results of operations.

20

If
we are unable to obtain the necessary permits and approvals in connection with
our acquisition of destination club properties, it may have a material adverse
effect on our business.

We intend
to continue to acquire additional destination club properties for our portfolio.
To successfully acquire and operate the properties as intended, we and/or our
subsidiaries must apply for and receive any necessary federal, state and/or
local and foreign permits and licenses as may be applicable to the properties.
We expect to receive such necessary permits and approvals; however, there can be
no assurance that such permits and approvals will be obtained. Failure to
receive the necessary permits and approvals could prohibit or substantially and
adversely impact our operations.

Increased
insurance risk, perceived risk of travel and adverse changes in economic
conditions as a result of recent events could significantly reduce our cash
flow, revenues and earnings.

We
believe that insurance and surety companies are re-examining many aspects of
their business, and may take actions including increasing premiums, requiring
higher self-insured retentions and deductibles, requiring additional collateral
on surety bonds, reducing limits, restricting coverages, imposing exclusions,
such as mold damage, sabotage and terrorism, and refusing to underwrite certain
risks and classes of business. Any increased premiums, mandated exclusions,
change in limits, coverages, terms and conditions or reductions in the amounts
of bonding capacity available may adversely affect our ability to obtain
appropriate insurance coverages at reasonable costs, which could significantly
reduce our business cash flow, revenues and earnings.

The
illiquidity of real estate investments could significantly limit our ability to
respond to adverse changes in the performance of our properties and
significantly reduce our cash flow, revenues and earnings.

Because
real estate investments are relatively illiquid, our ability to promptly sell
one or more of our properties in response to changing economic, financial and
investment conditions is limited. We cannot predict whether we will be able to
sell any property for the price or on the terms set by us, or whether any price
or other terms offered by a prospective purchaser would be acceptable to us. We
also cannot predict the length of time needed to find a willing purchaser and to
close the sale of a property.

We may be
required to expend funds to correct defects or to make improvements before a
property can be sold. We may not have funds available to correct those defects
or to make those improvements and as a result our ability to sell the property
would be limited. In acquiring a property, we may agree to lock-out provisions
that materially restrict us from selling that property for a period of time or
impose other restrictions on us. These factors and any others that would impede
our ability to respond to adverse changes in the performance of our properties
could significantly reduce our cash flow, revenues and earnings.

We
are subject to litigation in the ordinary course of business which could be
costly and time consuming.

We are,
from time to time, subject to various legal proceedings and claims, either
asserted or unasserted. Any such claims, whether with or without merit, could be
time-consuming and expensive to defend and could divert management’s attention
and resources. Although our management believes that we have adequate insurance
coverage and accrues loss contingencies for all known matters that are probable
and can be reasonably estimated, we cannot assure that the outcome of all
current or future litigation will not be costly and time consuming and otherwise
divert management’s attention away from operating the business.

21

Fluctuations
in real estate values may require us to write down the book value of real estate
assets.

Under
United States generally accepted accounting principles, we are required to
assess the impairment of our long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
management considers that could trigger an impairment review include significant
underperformance relative to minimum future operating results, significant
change in the manner of use of the assets, significant technological or industry
changes, or changes in the strategy for our overall business. When we determine
that the carrying value of certain long-lived assets is impaired, an impairment
loss equal to the excess of the carrying value of the asset, or asset group,
over its estimated fair value is recognized. These impairment charges would be
recorded as operating losses. Any material write-downs of assets could have a
material adverse effect on our financial condition and earnings.

We
will incur increased costs as a result of being a public company.

As a
public company, we incur significant legal, accounting and other expenses that
we did not incur as a private company. The U.S. Sarbanes-Oxley Act of 2002 and
related rules of the SEC and stock exchanges regulate corporate governance
practices of public companies. We expect that compliance with these public
company requirements will increase costs and make some activities more
time-consuming. For example, we have created new board committees and adopted
new internal controls and disclosure controls and procedures. In addition, we
incur additional expenses associated with our SEC reporting requirements. A
number of those requirements require us to carry out activities we have not done
previously. For example, under Section 404 of the Sarbanes-Oxley Act, our
management will need to assess and report on our internal control over financial
reporting and our independent accountants may need to issue an opinion on that
assessment and the effectiveness of those controls. Furthermore, if we identify
any issues in complying with those requirements (for example, if we or our
independent accountants identified a material weakness or significant deficiency
in our internal control over financial reporting), we could incur additional
costs rectifying those issues, and the existence of those issues could adversely
affect us, our reputation or investor perceptions of us.

We also
expect that it will be difficult and expensive to obtain and maintain director
and officer liability insurance, and we may be required to accept reduced policy
limits and coverage or incur substantially higher costs to obtain the same or
similar coverage. As a result, it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors or as executive
officers. Advocacy efforts by stockholders and third parties may also prompt
even more changes in governance and reporting requirements. We cannot predict or
estimate the amount of additional costs we may incur or the timing of such
costs.

We
depend on key personnel for the future success of our business and the loss of
one or more of our key personnel could have an adverse effect on our ability to
manage our business and implement our growth strategies, or could be negatively
perceived in the capital markets.

Our
future success and ability to manage future growth depends, in large part, upon
the efforts and continued service of our senior management team, which has
substantial experience in the resort and hospitality industry. Our President and
Chief Executive Officer, James Tousignant, our Chairman, Richard Keith, and our
Chief Financial Officer, Philip Callaghan, have been actively involved in the
acquisition, ownership and operation of resort properties and are actively
engaged in our management. Messrs. Tousignant, Keith and Callaghan substantially
determine our strategic direction, especially with regard to operational,
financing, acquisition and disposition activity. The departure of any of them
could negatively impact our ability to grow and manage our
operations.

Although
we are party to employment agreements with some of our key personnel, these
employment agreements do not require them to remain our employees and,
therefore, they could terminate their employment with us at any time without
penalty. We do not currently maintain key man life insurance on any of our
executives, and such insurance, if obtained in the future, may not be sufficient
to cover the costs of recruiting and hiring a replacement or the loss of an
executive’s services.

It could
be difficult for us to find replacements for such key personnel, as competition
for such personnel is intense. The loss of services of one or more members of
senior management could have an adverse effect on our ability to manage our
business and implement our growth strategies. Further, such a loss could be
negatively perceived in the capital markets, which could reduce the market value
of our securities.

22

Damage
to our destination club properties and other operational risks may disrupt our
business and adversely impact our financial results.

Depending
on the location of our destination club properties, a particular property may
bear an increased risk for damage by inclement weather, construction defects,
environmental matters, acts of terrorism, or other forces or acts, whether
intentional or unintentional. In addition, we rely heavily on our information
systems and other data processing systems. Any such damage to properties or
disruption in information systems could cause us to suffer financial loss, a
disruption of our businesses, regulatory intervention or reputational
damage.

Furthermore,
we depend on our headquarters in Kissimmee, Florida, where most of our
information systems and personnel are located, for the continued operation of
our business. A natural disaster or other catastrophic event or disruption in
the infrastructure that supports our businesses, including a disruption
involving electronic communications or other services used by us or third
parties with whom we conduct business, or directly affecting our headquarters,
could have a material adverse impact on our ability to continue to operate our
business without interruption. The impact of any disaster or disruption on our
business will likely be exacerbated by the fact that we do not have any disaster
recovery program in place to mitigate the harm or minimize the lost data that
may result from such a disaster or disruption. In addition, insurance and other
safeguards might only partially reimburse us for our losses, if at
all.

We
are vulnerable to the risk of unfavorable weather conditions and continued
inclement weather could reduce our revenues and earnings.

Our
ability to attract visitors to our resorts is influenced by weather conditions.
Unfavorable weather conditions can adversely affect visits and our revenues and
profits. Adverse weather conditions may discourage visitors from participating
in outdoor activities at our resorts. There is no way for us to predict future
weather patterns or the impact that weather patterns may have on results of
operations or visitation. Extreme weather conditions such as hurricanes or
prolonged periods of adverse weather conditions, or the occurrence of such
conditions during peak visitation periods, could have a material adverse effect
on our financial condition and results of operations by reducing revenues and
earnings.

Our
property development and management operations are conducted in many areas that
are subject to natural disasters and severe weather, such as hurricanes and
floods. We also may be affected by unforeseen engineering, environmental, or
geological problems. These conditions could delay or increase the cost of
construction projects, damage or reduce the availability of materials, and
negatively impact the demand for resorts in affected areas. If insurance
does not fully cover business interruptions or losses resulting from these
events, our earnings, liquidity and capital resources could be adversely
affected.

23

Our
success depends, in part, on the integrity of our systems and infrastructure.
System interruptions may have an adverse impact on our business, financial
condition and results of operations.

Our
success depends, in part, on our ability to maintain the integrity of our
systems and infrastructure, including websites, information and related systems
and call centers. System interruptions may adversely affect our ability to
operate websites, process and fulfill club member reservations and other
transactions, respond to customer inquiries and generally maintain
cost-efficient operations. We may experience occasional system interruptions
that make some or all systems or data unavailable or prevent us from efficiently
providing services. We also rely on third-party computer systems, broadband and
other communications systems and service providers in connection with the
provision of services generally, as well as to facilitate, process and fulfill
transactions. Any interruptions, outages or delays in these systems, or
deterioration in the performance of these systems and infrastructure, could
impair our ability to provide services. Fire, flood, power loss,
telecommunications failure, hurricanes, tornadoes, earthquakes, acts of war or
terrorism, acts of God and similar events or disruptions may damage or interrupt
computer, broadband or other communications systems and infrastructure at any
time. Any of these events could cause system interruption, delays and loss of
critical data, and could prevent us from providing services. Although we have
backup systems for certain aspects of our operations, these systems are not
fully redundant and disaster recovery planning is not sufficient for all
eventualities. In addition, we may not have adequate insurance coverage to
compensate for losses from a major interruption. If any of these adverse events
were to occur, it could adversely affect our business, financial condition and
results of operations.

In
addition, any penetration of network security or other misappropriation or
misuse of personal consumer information could cause interruptions in our
operations and subject us to increased costs, litigation and other liabilities.
Claims could also be made against us for other misuse of personal information,
such as for unauthorized purposes or identity theft, which could result in
litigation and financial liabilities, as well as administrative action from
governmental authorities. Security breaches could also significantly damage our
reputation with consumers and third parties with whom we do business. It is
possible that advances in computer capabilities, new discoveries, undetected
fraud, inadvertent violations of company policies or procedures or other
developments could result in a compromise of information or a breach of the
technology and security processes that are used to protect consumer transaction
data. As a result, current security measures may not prevent any or all security
breaches. We may be required to expend significant capital and other resources
to protect against and remedy any potential or existing security breaches and
their consequences. Consumers are generally concerned with security and privacy
of the Internet, and any publicized security problems affecting us may
discourage consumers from doing business with us, which could have an adverse
effect on our business, financial condition and results of
operations.

Our
success depends on the value of our name, image and brand, and if demand for our
destination club properties and their features decreases or the value of our
name, image or brand diminishes, our business, revenues and results of
operations would be reduced.

Our
success depends, to a large extent, on our ability to shape and stimulate
consumer tastes and demands by producing and maintaining luxurious, attractive,
and exciting properties and services, as well as our ability to remain
competitive in the areas of design and quality. There can be no assurance that
we will be successful in this regard or that we will be able to anticipate and
react to changing consumer tastes and demands in a timely manner.

Furthermore,
a high media profile is an integral part of our ability to shape and stimulate
demand for our destination club memberships with our target customers. A key
aspect of our marketing strategy is to focus on attracting media coverage. If we
fail to attract that media coverage, we may need to substantially increase our
advertising and marketing costs, which would decrease our earnings. In addition,
other types of marketing tools, such as traditional advertising and marketing,
may not be successful in attracting target customers.

Our
business would be adversely affected if our public image or reputation were to
be diminished. Our brand names and trademarks are integral to our marketing
efforts. If the value of our name, image or brands were diminished, our
business, revenues and results of operations would be reduced.

24

Any
failure to protect our trademarks could have a negative impact on the value of
our brand names and reduce our business and reduce revenues.

We
believe our trademarks are critical to our success. We rely on trademark laws to
protect our proprietary rights. The success of our business depends in part upon
our continued ability to use our trademarks to increase brand awareness and
further develop our brand. Monitoring the unauthorized use of our intellectual
property is difficult. Litigation may be necessary to enforce our intellectual
property rights or to determine the validity and scope of the proprietary rights
of others. Litigation of this type could result in substantial costs and
diversion of resources, may result in counterclaims or other claims against us
and could significantly harm our results of operations. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as do the laws of the United States. From time to time, we apply to have certain
trademarks registered. There is no guarantee that such trademark registrations
will be granted. We cannot assure that all of the steps we have taken to protect
our trademarks will be adequate to prevent imitation of our trademarks by
others. The unauthorized reproduction of our trademarks could diminish the value
of our brand and our market acceptance, competitive advantages or goodwill,
which could reduce our business and reduce revenues.

Changes
in weather patterns as a result of global warming could have an adverse effect
on our business.

Scientific
reports indicate that, as a result of human activity:

•

temperatures
around the world have been increasing and are likely to continue to
increase as a result of increasing atmospheric concentrations of carbon
dioxide and other carbon compounds;

•

the
frequency and severity of storms, and flooding, are likely to
increase;

•

severe
weather is likely to occur in places where the climate has historically
been more mild; and

•

average
sea levels have risen and are likely to rise more, threatening worldwide
coastal development.

We cannot
predict the effects that these phenomena may have on our business. We could be
impacted to the extent that global warming trends affect established weather
patterns or exacerbate extreme weather or weather fluctuations, hindering or
preventing travel by our club members in certain circumstances. They might also
affect the desirability of some of our properties, such as ones located on
beaches or in skiing areas, increase the cost and reduce the availability of
insurance covering damage from natural disasters for some of our properties and
lead to new laws and regulations that increase our expenses and reduce our
revenues. Any of these consequences, and other consequences of global warming
that we do not foresee, could materially and adversely affect our sales, profits
and financial condition.

Risks
Related to Our Common Stock

It
may be difficult for you to resell shares of our common stock if an active
market for our common stock does not develop.

As a
result of the delisting of our securities from the NYSE Amex in February 2010,
our common stock is not actively traded on a securities exchange and we
currently do not meet the initial listing criteria for any registered securities
exchange. Our securities are currently quoted on the Over-the-Counter Bulletin
Board. This factor may impair our stockholders' ability to sell their shares
when they want and/or could depress our stock price. As a result, stockholders
may find it difficult to dispose of, or to obtain accurate quotations of the
price of, our securities because smaller quantities of shares could be bought
and sold, transactions could be delayed and security analyst and news coverage
of our company may be limited. These factors could result in lower prices and
larger spreads in the bid and ask prices for our shares.

As of
March 31, 2010, our executive officers, directors and affiliated entities
together beneficially owned over 70% of our outstanding common stock (after
giving effect to the exchange of all ownership units of Ultimate Escapes
Holdings held by them into shares of our common stock, excluding any earn-out
units that may be issued).. In addition, James M. Tousignant, our
President and Chief Executive Officer and a member of our board of directors,
holds, as representative on behalf of the other owners of Ultimate Escapes
Holdings, 7,556,675 shares of our Series A Preferred Voting Stock, which vote as
a single class with shares of our common stock on all matters. As a result, Mr.
Tousignant has control over most matters that require approval by our
stockholders, including the election of directors and approval of significant
corporate transactions. Corporate action might be taken even if other
stockholders oppose them. This concentration of ownership might also have the
effect of delaying or preventing a change in control of our company that other
stockholders may view as beneficial.

We
may issue additional shares of our common stock, which would increase the number
of shares eligible for future resale in the public market and result in dilution
to our stockholders. This might have an adverse effect on the market price of
our common stock.

Outstanding
warrants to purchase an aggregate of 12,075,000 shares of common stock are
currently exercisable. These warrants would only be exercised if the $8.80 per
share exercise price is below the market price of our common stock. To the
extent they are exercised, additional shares of our common stock will be issued,
which will result in dilution to our stockholders and increase the number of
shares eligible for resale in the public market.

In
addition, if we achieve certain Adjusted EBITDA targets in each of 2010, 2011
and/or 2012, we will be required to issue up to 7,000,000 additional shares of
common stock to certain of Ultimate Escapes Holdings’ owners upon conversion of
additional ownership units issued if such targets are met. See “Certain
Relationships and Related Transactions and Director
Independence — Operating Agreement of Ultimate Escapes Holdings” for
additional information. Any such issuances would dilute the percentage ownership
by our current stockholders and reduce their influence on our management. These
issuances may also result in a decrease in the trading price of our common
stock.

Future
sales of our common stock may cause the market price of our securities to drop
significantly, even if our business is doing well.

In
accordance with lock-up obligations contained in the Operating Agreement of
Ultimate Escapes Holdings, the UE Owners will be able to sell their shares
of our common stock they are entitled to receive upon conversion of their
ownership units in connection with the reverse merger beginning on the first
anniversary of the consummation of the reverse merger. Pursuant to the
registration rights agreement entered into in connection with the consummation
of the reverse merger, the UE Owners have registration rights, subject to
certain limitations, with respect to shares of our common stock for which their
ownership units of Ultimate Escapes Holdings may be exchanged. We have agreed to
file, as soon as possible after the closing date of the reverse merger but in no
event later than June 29, 2010, a registration statement covering the shares of
our common stock for which their ownership units of Ultimate Escapes Holdings
may be exchanged. The UE Owners also have certain “piggyback” registration
rights applicable to some registration statements filed by us following the
consummation of the reverse merger. In addition, pursuant to a registration
rights agreement between us and our initial stockholders, our initial
stockholders or their permitted transferees will be entitled to rights to demand
two times that we register the resale of the founder shares and the sponsor
warrants (and shares underlying the sponsor warrants) at any time, in addition
to certain “piggyback” registration rights applicable to registration statements
filed by us, generally commencing one year after the consummation of the reverse
merger as to the founder shares and two months after the consummation of the
reverse merger as to the sponsor warrants (and shares underlying the sponsor
warrants). The presence of these additional securities trading in the public
market may have an adverse effect on the market price of our securities. The
sale by any of the foregoing, or entities they control or their permitted
transferees, could cause the market price of our securities to
decline.

26

Our
ability to request indemnification from the UE Owners for damages arising out of
the reverse merger is limited to those claims where damages exceed $600,000 and
is also limited to the shares of common stock issued in the reverse merger that
are held in escrow or may be set-off against earn-out payments.

To
provide a fund to secure the indemnification obligations of Ultimate Escapes
Holdings to us against losses that we may sustain as a result of (i) the
inaccuracy or breach of any representation or warranty made by Ultimate Escapes
Holdings or any UE Owner in the Contribution Agreement or any schedule or
certificate delivered by it or the UE Owners in connection with the Contribution
Agreement and (ii) the non-fulfillment or breach of any covenant or agreement
made by Ultimate Escapes Holdings in the Contribution Agreement, the UE Owners
placed in escrow an aggregate of 717,884 ownership units of Ultimate Escapes
Holdings, or 10% of the aggregate number of ownership units owned by the UE
Owners immediately prior to the reverse merger. With respect to claims based
upon certain representations and warrants deemed “Fundamental Representations”
by the parties or fraud or intentional misconduct, those claims are not limited
to the escrowed units but are subject to a cap of 25% of the aggregate number of
ownership units owned by the UE Owners immediately prior to the reverse merger,
which amount in excess of the escrowed units may be satisfied by us setting off
such claims against payments due to the UE Owners for any future earn-out
payments. Claims for indemnification may be asserted against the escrow by us
once our damages exceed a $600,000 deductible and will be reimbursable, by
cancellation of such units or set-off against future earn-out payments, as
applicable, to the full extent of the damages in excess of such amount. Claims
for indemnification may be asserted until the later of fifteen days after the
date on which we file our Annual Report on Form 10-K for the year ending
December 31, 2010 or April 15, 2011, with respect to certain claims; up to the
applicable statute of limitations with respect to claims based upon the breach
of certain designated representations and warranties; and up to the sixth
anniversary of the closing date of the Contribution Agreement with respect to
claims based upon the breach of “Fundamental Representations” by the parties or
fraud or intentional or willful misrepresentation or omission. As a consequence
of these limitations, we may not be able to be entirely compensated for
indemnifiable damages that we may sustain.

Public
stockholders at the time of the reverse merger who purchased units in our
initial public offering and did not exercise their conversion rights may have
rescission rights and related claims.

There
were several aspects of the reverse merger and the other matters which were not
described in the prospectus issued by us in connection with our initial public
offering. These include: that we may consummate a business combination outside
of the homeland security industry; that we may seek to amend the definition of
“business combination” in our certificate of incorporation; that we may seek to
amend our amended and restated certificate of incorporation to provide
conversion rights to holders of public shares, regardless of whether such holder
votes for or against the business combination; that the funds in the trust
account might be used to purchase shares from our stockholders who have
indicated their intention to vote against the reverse merger and convert their
shares into cash; and that we may seek to amend the terms of the warrant
agreement between us, our warrant agent and warrant holders (the “Warrant
Agreement”), to revise the exercise price and the expiration date. Consequently,
our consummation of a business combination with Ultimate Escapes Holdings (which
does not operate in the homeland security industry), our filing of certain
charter amendments in connection with the reverse merger, our use of funds in
the trust account to purchase shares of stockholders who had indicated their
intention to vote against the reverse merger or our amendment of the Warrant
Agreement might be grounds for a stockholder who purchased shares in the initial
public offering, excluding our founders, and still held them at the time of the
reverse merger without seeking to convert them into cash, to seek rescission of
the purchase of the units he acquired in the initial public offering. A
successful claimant for damages under federal or state law could be awarded an
amount to compensate for the decrease in value of his or her shares caused by
the alleged violation (including, possibly, punitive damages), together with
interest, while retaining the shares. If we are required to pay damages, our
results of operations could be adversely affected.

27

If
the reverse merger’s benefits do not meet the expectations of financial or
industry analysts, the market price of our securities may decline.

The
market price of our securities may decline if:

•

we
do not achieve the perceived benefits of the reverse merger as rapidly, or
to the extent anticipated by, financial or industry analysts;
or

•

the
effect of the reverse merger on our financial results is not
consistent with the expectations of financial or industry
analysts.

Accordingly,
investors may experience a loss as a result of a decline in the market price of
our securities. A decline in the market price of our securities also could
adversely affect our ability to issue additional securities and our ability to
obtain additional financing in the future.

Volatility
of our stock price could adversely affect stockholders.

The
market price of our common stock could also fluctuate significantly as a result
of:

•

quarterly
variations in our operating
results;

•

interest
rate changes;

•

changes
in the market’s expectations about our operating
results;

•

our
operating results failing to meet the expectation of securities analysts
or investors in a particular
period;

•

changes
in financial estimates and recommendations by securities analysts
concerning our company or our industry in
general;

•

operating
and stock price performance of other companies that investors deem
comparable to us;

•

news
reports relating to trends in our
markets;

•

changes
in laws and regulations affecting our
business;

•

material
announcements by us or our
competitors;

•

sales
of substantial amounts of common stock by our directors, executive
officers or significant stockholders or the perception that such sales
could occur;

•

general
economic and political conditions such as recessions and acts of war or
terrorism; and

•

other
matters discussed in the risk
factors.

Fluctuations
in the price of our common stock could contribute to the loss of all or part of
an investor’s investment in our company.

We
currently do not intend to pay dividends on our common stock and consequently
your only opportunity to achieve a return on your investment is if the price of
our common stock appreciates.

We
currently do not plan to declare dividends on our common stock in the
foreseeable future. Any payment of cash dividends will depend upon our financial
condition, capital requirements, earnings and other factors deemed relevant by
our board of directors. The terms of our current indebtedness contain, and
agreements governing future indebtedness will likely contain, restrictions on
our ability to pay cash dividends. Consequently, your only opportunity to
achieve a return on your investment in the common stock of our company will be
if the market price of our common stock appreciates and you sell your common
stock at a profit.

28

ITEM
2.

PROPERTIES

We
believe that our existing facilities are suitable and adequate for our business
and have sufficient capacity for their intended purpose.

Office
Facilities

Our
office facilities are leased, as follows:

Location

Purpose

SquareFeet

MonthlyRent

LeaseExpires

Kissimmee,
FL

Executive
offices

5,500

$

11,650

October
31, 2010

Fort
Collins, CO

Operations
center

4,500

$

10,400

August
31, 2010

Kansas
City, MO

Operations
center

8,800

$

9,400

December
31,
2010

Our
executive offices are leased from La Mirada Plaza, LLC, an affiliate of James M.
Tousignant, our President and Chief Executive Officer and a member of our board
of directors.

Club
Properties

The
majority of our club properties are owned by us, and certain club properties are
leased on either a long or short term basis. All of the properties owned by us
are subject to one or more mortgages. We intend to sell certain club properties
and those properties are classified as Held For Sale in our consolidated balance
sheet. Of the 37 properties leased by us as of December 31, 2009, 27 were
subject to long-term leases and ten were subject to short-term leases (including
two short-term leases in which PE Holdings, an affiliate of ours, is the
lessor).

The
following table summarizes the number of club properties by location as of
December 31, 2009.

UE Club

Destination

Owned

Leased

Total

Properties

Held For

Sale

US

Elite

Beaver
Creek

1

1

2

-

Deer
Valley

2

1

3

-

Delray
Beach

1

-

1

-

Indian
Rocks

1

-

1

-

Jackson
Hole

-

1

1

-

Key
West

1

-

1

-

Kiawah

1

1

2

-

La
Quinta

-

1

1

-

Lake
Las Vegas

1

-

1

-

Lake
Tahoe

-

1

1

-

Maui

1

1

2

-

Naples

-

1

1

-

New
York City

4

1

5

-

Scottsdale

2

-

2

-

Steamboat
Springs

-

1

1

-

29

Stowe

-

1

1

-

Sun
Valley

2

-

2

-

Telluride

1

4

5

-

Watercolor

-

1

1

-

Total
Elite

18

16

34

0

Signature

Bend,
Oregon

-

1

1

-

Big
Island

-

1

1

-

Boca
Raton

-

1

1

-

Breckenridge

1

-

1

-

Candlewood

1

-

1

1

Carlsbad

1

-

1

1

Chicago

1

-

1

1

Copper
Mountain

1

-

1

-

Deer
Valley

-

1

1

-

Jackson
Hole

2

-

2

-

Kiawah

1

2

3

-

La
Quinta

1

1

2

-

Lake
George

1

-

1

-

Lake
Tahoe

1

-

1

-

Maui

-

2

2

-

Miami
Beach

1

-

1

-

Naples

1

-

1

-

New
York City

4

-

4

-

Orlando

-

1

1

-

Outerbanks

1

-

1

-

Reynolds
Plantation

1

-

1

-

Scottsdale

2

1

3

1

Steamboat
Springs

1

1

2

-

Telluride

2

1

3

-

Watercolor

1

-

1

-

25

13

38

4

Premiere

Beaver
Creek

1

-

1

-

Big
Island

2

-

2

-

Carlsbad

1

-

1

1

Chicago

1

-

1

-

Fox
Acres

1

-

1

-

Jackson
Hole

1

-

1

-

Kiawah

1

-

1

-

La
Quinta

2

-

2

-

Lake
Las Vegas

1

-

1

-

Lake
Tahoe

3

-

3

1

Miami

1

-

1

-

Naples

1

-

1

-

30

New
York City

3

-

3

-

Outerbanks

1

-

1

-

Reynolds
Plantation

1

-

1

-

Steamboat
Springs

1

-

1

1

Stowe

1

-

1

-

Watercolor

1

-

1

-

Total
Premiere

24

0

24

3

US
Total

67

29

96

7

Foreign

Elite

Bahamas

2

-

2

-

Italy

-

1

1

-

London

-

1

1

-

Los
Cabos, Mexico

5

2

7

-

Nevis

5

-

5

-

Paris

-

1

1

-

St.
Thomas

1

-

1

-

Total
Elite

13

5

18

0

Signature

Bahamas

3

-

3

1

Costa
Rica

-

1

1

-

Dominican
Republic

1

-

1

-

Italy

1

-

1

-

La
Buscador (BVI)

1

-

1

-

London

-

1

1

-

Los
Cabos, Mexico

7

-

7

-

Nevis

2

-

2

-

Turks
& Caicos

1

-

1

-

Total
Signature

16

2

18

1

Premiere

Belize

1

-

1

-

Costa
Rica

-

1

1

-

Dominican
Republic

1

-

1

-

Italy

2

-

2

-

Los
Cabos, Mexico

2

-

2

-

Punta
Mita, Mexico

1

-

1

-

Turks
& Caicos

1

-

1

-

Total
Premiere

8

1

9

0

Foreign
Total

37

8

45

1

Grand
Total

104

37

141

8

31

ITEM 3.

LEGAL
PROCEEDINGS

We are
not currently subject to any material legal proceedings. From time to time,
however, we may become involved in litigation and other legal proceedings
relating to claims arising from our operations in the normal course of business,
including claims involving club membership disputes.

Our
common stock and warrants are each listed on the OTC Bulletin Board under the
ticker symbols ULEI and ULEIW, respectively.

Prior to
February 19, 2010, our common stock and warrants were listed on the NYSE Amex
under the symbols UEI and UEI.WS, respectively. Our units were listed on the
NYSE Amex under the symbol UEI.U until October 30, 2009. Our units commenced
public trading on October 23, 2007 and our common stock and warrants commenced
public trading on January 18, 2008.

The table
below sets forth, for the calendar quarters indicated, the high and low closing
sales prices of our units, common stock and warrants as reported on the NYSE
Amex or the OTC Bulletin Board, as appropriate.

Quarter Ended

Units

Common

Warrants

High

Low

High

Low

High

Low

March
31, 2008

7.95

7.41

7.30

6.67

0.68

0.28

June
30, 2008

7.72

7.40

7.49

7.18

0.32

0.25

September
30, 2008

7.70

7.46

7.60

7.35

0.26

0.10

December
31, 2008

7.28

7.00

7.32

6.99

0.13

0.02

March
31, 2009

7.65

6.58

7.85

7.35

0.15

0.02

June
30, 2009

7.80

7.45

7.90

7.32

0.06

0.01

September
30, 2009

7.93

7.80

7.91

7.75

0.15

0.04

December
31, 2009

8.52

7.93

8.25

3.70

0.40

0.06

As of
March 31, 2010, our common stock and warrants closed at $2.02 and $0.02,
respectively and there were 99 holders of record of our common stock and 2
holders of record of our warrants.

Dividend
Policy

We have
not paid any dividends on our common stock to date and do not anticipate paying
any dividends in the foreseeable future. We intend to retain future earnings, if
any, in the operation and expansion of our business. Any future determination to
pay cash dividends will be made at the discretion of our board of directors and
will depend on our financial condition, results of operations, capital
requirements and other factors that our board of directors deems relevant. In
addition, the terms of our current indebtedness precludes us, and the terms of
any future indebtedness that we may incur could preclude us, from paying
dividends.

33

Recent
Sales of Unregistered Securities

On
October 29, 2009, we consummated the reverse merger. Pursuant to the terms of
the Contribution Agreement, we received 1,232,601 ownership units of Ultimate
Escapes Holdings, in consideration for $9.8 million. The UE Owners retained the
remaining 7,556,675 ownership units of Ultimate Escapes Holdings, which, under
the terms of the Operating Agreement, may be converted by the UE Owners on a
one-to-one basis into shares of our common stock. Of such retained units,
717,884 units were deposited into escrow at the closing of the reverse merger to
secure the indemnification obligations of the UE Owners to us in connection with
the reverse merger. Additionally, the UE Owners are eligible to receive up to an
aggregate of 7,000,000 additional ownership units of Ultimate Escapes Holdings,
convertible on a one-to-one basis into shares of our common stock, upon the
achievement by Ultimate Escapes Holdings of certain Adjusted EBITDA milestones,
as set forth in the Operating Agreement. For each ownership unit of Ultimate
Escapes Holdings issued to the UE Owners, the Owner Representative also received
one share of our Series A Voting Preferred Stock. At any time that any UE Owner
exchanges ownership units of Ultimate Escapes Holdings for shares of our common
stock, a like number of shares of Series A Voting Preferred Stock will be
canceled. Upon consummation of the reverse merger, Ultimate Escapes Holdings
became our subsidiary, and the business and assets of Ultimate Escapes Holdings
and its subsidiaries are our only operations.

Also on
October 29, 2009, we issued options to purchase a total of 8,800 shares of our
common stock to our employees, at an exercise price of $0.01 per share, all of
which options were exercised in full on that date.

The above
shares were issued in private placements not involving a public offering under
the Securities Act of 1933 pursuant to Section 4(2) of the Securities Act of
1933 and/or Regulation D promulgated thereunder. We have not engaged in general
solicitation or advertising with regard to the issuance of the shares of Series
A Preferred Voting Stock or the common stock and have not offered securities to
the public in connection with these issuances.

Use
of Proceeds

We were
incorporated on May 14, 2007 as a blank check company for purposes of acquiring,
by way of a business combination, one or more domestic or international
businesses. In connection with our initial public offering of our
common stock and warrants (the “IPO”), the SEC declared our Registration
Statement on Form S-1 (No. 333-144028), filed under the Securities Act
of 1933, effective on October 23, 2007.

On
October 29, 2007, we completed the IPO, issuing 10,000,000 Units, consisting of
one share of common stock and one warrant, at $8.00 per Unit. Upon
the closing of the Offering, $79,200,000 of the aggregate gross proceeds of
$80,000,000 were placed in a trust account and invested in United States
government securities, pending completion of a business combination. The
net proceeds of the Offering not held in the trust account were permitted
to be used to pay for business, legal and accounting due diligence on
prospective business combinations and continuing general and administrative
expenses. Additionally, an aggregate of $1,000,000 of interest earned on the
trust account balance was released to fund working capital requirements and an
additional $150,000 of interest earned was released to repay a loan from Secure
America Acquisition Holdings, LLC (“SAAH”). Additional funds were also released
to fund tax obligations.

The
reconciliation of the funds held in trust immediately prior to the business
combination with Ultimate Escapes Holdings is as follows:

Contribution
to Trust Fund

$

79,200,000

Interest
income

2,007,884

Withdrawals
to fund loan repayments

(150,000

)

Withdrawals
to fund income taxes

(606,826

)

Withdrawals
to fund operations

(1,000,000

)

Balance
at October 29, 2009

$

79,451,058

34

On
October 29, 2009, we consummated the business combination with Ultimate Escapes
Holdings, as described under “History” in Item 1 - Business.

In
connection with stockholder approval of the business combination, holders of
2,709,261 shares of our common stock elected to convert their shares to
cash. We also entered into forward contracts to purchase 6,031,921 of
the shares of common stock sold in the initial public offering in privately
negotiated transactions from stockholders who would otherwise have voted against
the business combination, for an aggregate purchase price of approximately
$48.1 million. The closing of such purchases was effected upon the
closing of the reverse merger out of the funds that were held in the trust
account and were released as a result of the consummation of the business
combination. In connection with such purchases, we paid a fee
to a fund managed by Victory Park Capital Advisors, LLC of $123,974 for
purchasing an aggregate of 1,561,380 shares from stockholders who
would otherwise have voted against the business combination and exercised
their conversion rights.

Following
the consummation of the business combination, the amounts in the trust fund were
disbursed as follows:

Balance
at October 29, 2009

$

79,451,058

Conversion
of 2,709,261 common shares to cash

21,525,365

Settlement
of forward contracts to purchase 6,031,921 common shares

48,138,840

69,664,205

Funds
remaining representing 1,258,818 shares

9,786,853

Payment
of transaction expenses

383,792

Payment
of equity funding costs

3,683,298

4,067,090

Working
capital provided to Ultimate Escapes Holdings

$

5,719,763

Issuer
Purchases of Equity Securities

Period

Total Number of

Shares Purchased

Average Price Paid

per Share

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans or

Programs

Maximum Number

(or Approximate

Dollar Value) of

Shares that may yet

be purchased

under the Plans or

Program

October

8,741,182

(1)

7.94

8,741,182

(1)

-

November

-

-

-

-

December

-

-

-

-

(1) Of
the 8,741,182 shares purchased, 2,709,261 shares were repurchased from
stockholders who elected to convert their shares to cash in connection with the
business combination. In connection with the business combination, we entered
into forward contracts to purchase 6,031,921 of the shares of common stock sold
in the initial public offering in privately negotiated transactions from
stockholders who would otherwise have voted against the business
combination, for an aggregate purchase price of
$48,138,840.

35

ITEM
6.

SELECTED
HISTORICAL FINANCIAL DATA

We
are a “smaller reporting company” as defined by Regulations S-K and as such, are
not required to provide the information contained in this Item pursuant to
Regulation S-K.

ITEM 7.

MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The
following discussion should be read in conjunction with our consolidated
financial statements and the notes thereto included elsewhere in this Annual
Report.

Overview

We are a
luxury destination club that sells club memberships offering members reservation
rights to use our vacation properties, subject to the rules of the club member’s
Club Membership Agreement. Our properties are located in various resort
locations throughout the world.

On
September 15, 2009, we consummated the acquisition of certain of the assets,
liabilities, properties and rights thereto of Private Escapes, in exchange for
ownership units in our subsidiary Ultimate Escapes Holdings. The operating
results of Private Escapes are included in our consolidated financial statements
from September 16, 2009. On October 29, 2009, we consummated the reverse merger
with Ultimate Escapes Holdings.

The
following discussion of financial condition and results of operations does not
include the operating results of Secure America Acquisition Corporation (as we
were named prior to the consummation of the reverse merger) prior to October 30,
2009.

We expect
that our financial performance will improve in 2010 and 2011 as a result of the
combination of the Ultimate Escapes Holdings and Private Escapes’ businesses,
the utilization of current excess capacity and the arrangements with various
hotels and resorts coming into effect in 2010, as well as anticipated
improvements in worldwide economic conditions generally.

We had
1,214 members and 826 members as of December 31, 2009, and 2008,
respectively.

Critical
Accounting Policies

Our
financial statements and the notes to our financial statements contain
information that is pertinent to management’s discussion and analysis. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities. Management bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. On a continual basis, management
reviews its estimates utilizing currently available information, changes in
facts and circumstances, historical experience and reasonable assumptions. After
such reviews, and if deemed appropriate, those estimates are adjusted
accordingly. Actual results may vary from these estimates and assumptions under
different and/or future circumstances. Management considers an accounting
estimate to be critical if:

•

it
requires assumptions to be made that were uncertain at the time the
estimate was made; and

36

•

changes
in the estimate, or the use of different estimating methods that could
have been selected, could have a material impact on our results of
operations or financial
condition.

The
following critical accounting policies have been identified that affect the more
significant judgments and estimates used in the preparation of our financial
statements. We believe that the following are some of the more critical judgment
areas in the application of our accounting policies that affect our financial
condition and results of operations. The following critical accounting policies
are not intended to be a comprehensive list of all of our accounting policies or
estimates.

Use of
Estimates - The preparation of consolidated financial statements in
conformity with accounting principles generally accepted in the United States of
America requires us to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements. The
reported amounts of revenues and expenses during the reporting period may be
affected by the estimates and assumptions we are required to make. Estimates
that are critical to our accompanying consolidated financial statements arise
from our belief that (1) we will be able to raise and/or generate sufficient
cash to continue as a going concern, (2) our estimates of the expected lives of
the club memberships from which we derive our revenues and on which we base our
revenue recognition are reasonable, (3) all long-lived assets are recoverable,
and (4) our estimates of the cost of our stock-based compensation plans are
reasonable. Estimates and assumptions are reviewed periodically and the effects
of revisions are reflected in the period that they are determined to be
necessary. It is at least reasonably possible that our estimates could change in
the near term with respect to these matters.

Revenue
Recognition - We derive our revenue from the club memberships we sell,
which allow the club members to use the club properties owned or leased by us.
Different levels of club membership provide access to different properties
and/or increased usage of the properties. Club members pay a one-time club
membership fee (which includes a non-refundable initiation fee), together with
annual dues. Club members sometimes pay additional fees or charges related to
their use of specific properties or club services. Club members may upgrade
their level of membership at any time by paying additional upgrade fees and
annual dues. The terms of each club membership is set out in a Club Membership
Agreement.

Club
members who resign may receive a partial redemption of their membership fee. We
provide assistance to club members who resign by using commercially reasonable
efforts to resell a resigned club members’ membership, and upon such resale, the
resigning club member generally receives 80% of the proceeds of sale and we
retain the remainder as a transfer fee. In the event we are unable to resell a
resigning club members’ membership after an agreed period of time, we have
certain arrangements with such club members to provide a partial redemption of
their membership fee (excluding the initiation fee), based on a sliding scale
that declines to zero over a 10 year period.

We
amortize the non-refundable initiation fee over the expected life of the club
membership, currently estimated as 10 years. The remaining portion of the club
membership fee, which is included in membership deposits-redemption assurance
program in our consolidated balance sheet, is amortized over a 10 year period
using the straight line method. Management believes that, based on their
knowledge of the industry and our competitors, our own extrapolated experience,
and practices in similar membership organizations, that period reasonably
reflects the expected life of the club memberships, and is consistent with any
obligation we may have to provide a partial refund of the membership fee.
Members who joined under a previous plan (no longer offered) may receive a
refund of their membership fee (excluding the non-refundable initiation fee),
subject to the redemption procedures identified in their Club Membership
Agreements. These fees, which are included in membership deposits - other
programs in our consolidated balance sheet, are subject to refund should the
member resign and are not recognized in income.

37

Annual
club membership dues are billed in advance. Payment of these annual dues permits
the club member to continue to make reservations and use the club properties
during their membership year and the annual dues are recognized in income on a
straight-line basis over the 12 month period to which they relate. Revenue from
ancillary charges and other services provided by us to club members when using
club properties is recognized at the time of sale.

Impairment of
Long-Lived Assets and Goodwill - We analyze our long-lived assets,
including property and equipment and intangible assets, in accordance with
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 360 “Property, Plant
and Equipment” annually and when events and circumstances might indicate
that the assets may not be recoverable. If the undiscounted net cash flows are
less than the assets’ carrying amounts, we record an impairment based on the
excess of the assets’ carrying value over fair value. Fair value is determined
based on discounted cash flow models, quoted market values and third-party
appraisals. We evaluate our real estate assets on a combined basis, as future
cash flows include club membership sales and dues that are not identifiable to
individual properties. Estimates of future cash flows are based on internal
projections over the expected useful lives of the assets and include cash flows
associated with future maintenance and replacement costs, but exclude cash flows
associated with future capital expenditures that would increase the assets’
useful lives. Our management believes there is no impairment as of December 31,
2009.

Goodwill
consists of the excess of the purchase price paid for Private Escapes over the
fair value of the identifiable assets and liabilities acquired. Goodwill is not
amortized, but is tested for impairment, at least annually, by applying the
recognition and measurement provisions of FASB ASC 350-20 “Goodwill”, which compares the
carrying amount of the asset with its fair value. If impairment of carrying
value based on the estimated fair value exists, we measure the impairment
through the use of projected discounted cash flows. We operate as a
single operating segment. We have not identified any components within our
single operating segment and thus have a single reporting unit for purposes of
our goodwill impairment test.

Stock-based
Compensation - As
described in our financial statements in “Note 13 — Equity
Compensation”, we previously had a stock-based compensation plan
utilizing equity units of our former parent company, Ultimate Resort, LLC. That plan was
discontinued on completion of the reverse merger on October 29, 2009, and as of
that date we adopted the 2009 Stock Option Plan, which provides for the issuance
of options to acquire up to 1,200,000 shares of our common stock.

We
recognize compensation expense in an amount equal to the grant-date fair value
of the equity units or, following adoption of the 2009 Stock Option Plan, the
grant-date fair value of the common stock options. The estimated fair value of
these equity units and options, as of the date of grant, is recorded as
compensation cost over the vesting period.

Determining
the fair value of the equity units previously issued required making potentially
complex and subjective judgments. Our approach to valuation of the units, which
were granted to employees at no cost to them, was to estimate their fair value
based on the proceeds received by the parent company for other equity units with
broadly similar characteristics. There was inherent uncertainty in making these
estimates. During 2008 and 2009, we estimated the fair value at $30,000 per
unit. During 2008, there were 83 equity units that vested and at December 31,
2008, there were a further 235 equity units that had not yet vested. All of
these 235 equity units, together with 121 equity units issued in 2009, vested
immediately on completion of the reverse merger on October 29, 2009. We
recognized compensation expense of approximately $6.6 million in 2009, including
approximately $5 million as a result of the accelerated vesting of these equity
units upon consummation of the reverse merger.

38

Recent Accounting
Pronouncements

The
following Accounting Standards Codification Updates have been issued, or will
become effective, after the end of the period covered by this
discussion:

To the
extent appropriate, the guidance in the above Accounting Standards Codification
Updates is already
reflected in our consolidated financial statements and management does not
anticipate that these accounting pronouncements will have any future effect on
our consolidated financial statements.

At its
meeting on March 18, 2010, the FASB’s Emerging Issues Task Force reached a
consensus on five issues. The consensuses were ratified by the FASB
at its meeting on March 31, 2010, and the related Accounting Standards
Codification Updates to be issued will become authoritative accounting
guidance. None of the consensuses address issues that we expect to
have a material effect on our consolidated financial
statements.

Year
Ended December 31, 2009 compared with the Year Ended December 31, 2008 (in
thousands)

Revenues

Revenues
of $37,011 increased by $14,470, or 64%, during the year ended December 31,
2009, from $22,541 during the same period in 2008. The higher revenues in 2009
include a $12,144 assessment fee charged to members in 2009 that was not charged
in 2008. Membership annual dues were $14,938 in 2009, representing a
decrease of $2,548, or 15% from annual dues of $17,486 in 2008, primarily
because of early dues renewal programs offered in 2008 and not offered in 2009,
which accelerated revenues into 2008. Other revenue was $2,817 in
2009, representing an increase of $1,821, or 183% compared with $996 in 2008 due
to the cross reservation program fees in 2009 charged to Private Escapes for
allowing their members to stay at our properties. This
cross-reservation program ended effective September 15, 2009, when we acquired
Private Escapes.

Operating
Expenses

Operating
expenses were $40,422 in 2009, representing an increase of $4,117, or 11%, from
operating costs of $36,305 in 2008. Property operating costs
increased $1,143 in 2009 from 2008 primarily due to the cross reservation
program fees in 2009 charged by Private Escapes for allowing our members to stay
at their properties prior to the September 15, 2009 acquisition of certain of
their assets and liabilities. Depreciation and
amortization increased by $1,047 to $5,526 in 2009, from $4,479 in
2008 reflecting the acquisition of Private Escape properties in September
2009. Advertising costs decreased $1,076 in 2009 from 2008 due to a
revised marketing strategy to target member referrals and other qualified leads
produced as a result of a joint marketing agreement with Private Escapes that
began in the second half of 2008. Salary costs increased by $2,334 in
2009 compared with 2008, primarily as a result of increased stock-based
compensation expense, primarily as a result of the accelerated vesting of equity
units in connection with the reverse merger with SAAC, offset by staffing
reductions and labor cost savings of which had been implemented in late
2008. General and administrative costs decreased in 2009 compared
with 2008 by $2,088 due primarily to reductions in credit card fees of $1,445,
insurance costs of $300, travel costs of $216, and office lease costs of
$41. In 2009, we incurred a net loss of $535 on the sale
of certain properties and recognized an impairment loss of $2,839
related to certain properties held for sale, compared with a $27 net gain on the
sale of certain properties in 2008. The assets held for sale
were chosen because of low occupancy by club members or because we determined
that we had excess inventory. Impairment was calculated by comparing
the carrying value on the books with the expected net proceeds of the
sale. Sales commissions decreased $553 in 2009 compared with 2008 due
to lower sales volumes in 2009.

Income (Loss)
Before Other Income (Expense)

As a
result of the above, our loss before other income (expense) improved by $10,353,
or 75%, to a loss of $3,411 for 2009, from a loss of $13,764 in
2008.

Other Income
(Expense)

Interest
expense increased to $10,006 for 2009, from $9,717 in 2008, due to the
additional acquisition debt in the September 2009 purchase of Private
Escapes. Interest income decreased by $180 to $98 in 2009 from $278
in 2008 due to lower interest-bearing money market cash balances in 2009 than
2008.

In
connection with the consummation of the reverse merger in October 2009, we
incurred $384 of transaction-related expenses.

In
connection with the reverse merger in October 2009, we offered our members the
opportunity to convert their outstanding Redemption Assurance Program (RAP)
balance to our common stock. We subsequently issued $8,963 of common stock in
connection with the conversion of $8,249 of the members’ RAP balance to common
stock and recognized $714 as an inducement expense.

42

As of
December 31, 2009, we recognized a gain of $1,458 related to the outstanding
contingent consideration for our September 15, 2009 acquisition of the business
of Private Escapes, as a result of both a change in the estimate of the
contingent consideration payable and a decrease since the acquisition date in
the fair value of our common stock, in which the consideration is
payable.

Liquidity
and Capital Resources (in thousands)

Historically,
our primary sources of cash have been cash flows from equity capital, club
membership fees, annual dues, bank borrowings and term loans. Cash has been used
for real estate purchase transactions, repayment of long term debt, purchases of
equipment and working capital to support our growth. In 2009, a one time
assessment fee was levied on our membership base. In 2010, annual revenues from
dues are expected to increase as a result of a cost of living increase in the
dues charged and the anticipated high renewal rate of members. Membership fees
and upgrade fees are subject to the health of the economy and are less
predictable. We do not intend to levy an assessment fee in 2010 unless the
majority of members vote in favor of any proposed assessment. We intend to seek
to raise more equity in 2010. We also plan to sell excess properties in our
portfolio, the proceeds of which will primarily be used to repay debt. We have
plans to spread out the collection of annual dues more evenly throughout the
year.

Cash and
cash equivalents, consisting primarily of deposits with financial institutions
and credit card holdbacks, but excluding $4,343 of restricted cash, was $2,747
at December 31, 2009, compared with $966 at December 31, 2008. The increase of
$1,781 was largely attributable to the club member assessment program initiated
and implemented in the first five months of 2009.

We
anticipate being able to meet our projected internal growth and operating needs,
including capital expenditures, and expect to meet the cash requirements of our
contractual obligations for at least the next 12 months if we are successful in
executing our plans to increase our capital resources. Planned capital
expenditure projects include approximately $513 for the complete renovation of
our seven Trump Tower units in New York.

We
incurred net losses of $12,965 and $23,222 during the years ended December 31,
2009 and 2008, respectively. As of December 31, 2009, our current liabilities,
excluding $12,600 of deferred annual membership dues that we expect to recognize
in income in 2010, were $31,164, which exceeded our current assets of $6,710,
excluding restricted cash of $4,343, by $24,454. In addition, although we have
completed the acquisition of certain assets and liabilities of Private Escapes,
refinanced our credit facility with CapitalSource and completed the reverse
merger, we may not be able to meet certain covenants under the CapitalSource
credit facility in the future. We have also experienced a decrease in new
membership sales and existing member upgrades over the last six months of 2008
and throughout 2009.

The above
factors, among others, indicate that we may encounter a liquidity event in the
future which may cause us to be in default of our loan covenants. We are taking
steps to increase cash flow in order to cover 2010 operational expenses,
including, without limitation, the sale of selected club properties, and closely
monitoring and reducing operating expenses wherever possible.

Total
current and long term debt outstanding at December 31, 2009 was $123,279
compared with $96,765 outstanding at December 31, 2008. The
debt outstanding at December 31, 2009 is primarily the amount
outstanding under our CapitalSource credit facility of $98,982, a shareholder
note payable of $10,000, various mortgages aggregating $13,590, as discussed
below, and a non-mortgage notes totaling $707.

43

CapitalSource
Revolving Credit Facility

Our
amended and restated loan and security agreement with CapitalSource, entered
into on September 15, 2009, provides for borrowings up to the lesser of a
defined maximum amount or a defined borrowing base amount. The maximum amount
available is $110 million through December 31, 2009, $108 million from January
1, 2010 through June 30, 2010, $105 million from July 1, 2010 through December
31, 2010 and $100 million from January 1, 2011 to the maturity date of April 30,
2011. The borrowing base amount is a percentage of the appraised value of all
owned property encumbered by a mortgage in favor of CapitalSource. Through March
31, 2010, that percentage was 75%, from April 1, 2010 through December 31, 2010
it is 70% and from January 1, 2011 it is 65%. We are currently in negotiations
with CapitalSource to extend the dates by which time we have to meet these
percentage requirements.

Interest
under the loan agreement is calculated on the actual days elapsed and the basis
of a 360 day year and is payable monthly at the three-month LIBOR (approximately
0.25% at January 1, 2010) plus 5% per annum, subject to a floor of 8.75%. An
exit fee of $1.65 million is due on maturity or earlier if the loan is
terminated for any reason. The maturity date may be extended at our request for
two additional one year periods, provided there is no default under the loan
agreement and on payment of an extension fee of 0.25% of the then maximum loan
amount of $100 million. Except for payments required on the sale of a mortgaged
property, no principal payments are due until maturity on April 30, 2011, except
required cash payments of $2 million on December 31, 2009, $3 million prior to
June 30, 2010 (which have both been paid as of March 31, 2010) and $5 million
prior to December 31, 2010. As described above, we are currently in negotiations
with CapitalSource which may require us to increase the repayment obligations
due by June 30, 2010 and December 31, 2010. If we exercise one or both of the
extension options, cash payments are required of $5 million on each of June 30,
2011, December 31, 2011, June 30, 2012 and December 31, 2012. We may voluntarily
prepay any part of the loan at any time but may terminate the loan agreement
only by providing 30 days written notice and prepaying outstanding amounts in
full.

We are
required to meet certain covenants as defined in the loan agreement,
including:

•

Maintain
either (1) a restricted cash balance of not less than six months debt
service, or (2) a debt service coverage ratio of 1.25 to 1.00, based on
the ratio of Adjusted EBITDA for the immediately preceding 12 calendar
months, to debt service (excluding balloon maturities of indebtedness) on
a consolidated basis for the immediately preceding 12 calendar months. On
March 16, 2010, CapitalSource agreed to reduce the restricted cash balance
interest reserve by approximately $1,500,000, to be replenished in equal
installments at the end of June, September, and December
2010.

•

Remain
in compliance at all times with applicable requirements as to the ratio of
the number of properties to club members or “equivalent club members”, as
set forth in the applicable club membership
plans;

•

Maintain
a leverage ratio between debt and consolidated tangible net worth of no
more than 3.5:1;

•

For
the years ending December 31, 2009 and 2010, the consolidated net loss
must not exceed $10 million and $5 million, respectively, and for the year
ending December 31, 2011 and each succeeding year, the consolidated net
income must not be less than $1 (net loss is adjusted in each year
for the non-refundable portion of new member initiation fees not yet
recognized in income and for non-cash stock-based compensation expensed in
2009); and

•

The
debt ratio (aggregate mortgage financing to the aggregate appraised value
for all owned Property) on a consolidated basis must not exceed
80%.

44

In
addition to various covenants, the CapitalSource loan agreement contains
customary events of default that would permit CapitalSource to accelerate
repayment of amounts outstanding, including failure to pay any amounts
outstanding under the loan agreement when due, insolvency, judgment or
liquidation, failure to pay other borrowed money in excess of $500,000, failure
to comply with the terms and conditions of the loan agreement, suspension of the
sale of club memberships, termination of any club or club membership plan,
failure to pay (without CapitalSource’s consent) any amounts due to a resigning
club member in accordance with the terms of his or her club membership agreement
and a change in our management (as defined in the loan agreement).

Note
Payable to Shareholder

On April
30, 2007, Ultimate Resort Holdings issued a $10 million note payable to JDI,
which at the time was a minority owner of Ultimate Resort Holdings and is now a
minority owner of Ultimate Escapes Holdings. The obligations of Ultimate Resort
Holdings under this note were subsequently assigned to Ultimate Escapes
Holdings, when it assumed the Ultimate Resort Holdings operations, as discussed
in Note 2 to our consolidated financial statements. On October 29, 2009, JDI
assigned its interest in the note, as lender, to Ultimate Resort Holdings. The
financial terms of the note remained unchanged. At the same time, Ultimate
Resort, the majority owner of Ultimate Resort Holdings, acquired from JDI the
minority interest in Ultimate Resort Holdings held by JDI. In consideration for
the acquisition of the minority interest and the transfer, as lender, to
Ultimate Resort Holdings of the note, JDI received 3,123,797 ownership units of
Ultimate Escapes Holdings.

The note
has a ten year term, with interest payable quarterly at 5% per annum and no
principal payments are due until maturity on April 30, 2017. The note, which is
subordinate to the revolving loan from CapitalSource, is collateralized by a
second security interest in our assets and in certain real
property.

Other
Mortgage Loans

At
December 31, 2009, we have other mortgage loans, aggregating $13,590, which we
acquired when Ultimate Escapes Holdings acquired certain assets and liabilities
of Private Escapes. These mortgages are held by a number of mortgage
providers and individuals and carry interest rates ranging from 3.4% to 15.0%.
Certain of the mortgages are due within twelve months and, where possible, we
are seeking to extend or renew these mortgages.

Included
in these mortgage loans is $234 of the remaining outstanding principal balance
of $936 related to a $3.75 million loan from Kederike, LLC, an entity in which
Richard Keith, our Chairman, is a 50% owner. The original loan proceeds were
used to pay a portion of the purchase price for the acquisition of four
properties. Ultimate Escapes Holdings assumed $234 of the remaining outstanding
principal balance when it acquired Private Escapes. The remainder of the
outstanding principal balance of $702 was assumed by an entity controlled by Mr.
Keith. Interest accrues on the loan at a rate equal to 1.5% above the interest
rate applicable to the primary bank loan financing the original acquisition of
the properties. The maturity date of the loan was October 15, 2009;
however, the parties have negotiated an extension of the maturity date until
June 30, 2010 on substantially the same terms.